Thursday, 16 July 2009

Commentary: Your source for news, commentary, and stock info

Stocks Comeback

In the last five days, we have seen a phenomenal comeback in stock prices. Yesterday was a tremendous short covering day. It was pretty obvious because I can only remember one day in the last 20 months like it. That day was November 13th for those that remember. It was pretty much an identical type day. Stocks opened strong and continued to move higher the entire day. I am sitting back in amazement at the apparent ability of the overall market (i.e. DJIA, S&P & NASDAQ) to magically levitate at these levels. It just doesn’t seem to want to go down, and I was one of the eager bears who were salivating at the anticipation of a moderate price decline in stocks. But this week’s market action is clearly pointing to something else. Being a trend follower means going with the direction of the market, and it is obvious by the actions of the major players in the market that the market isn’t ready to come plunging back down just yet. Maybe, we weren’t able to go down because that’s what everyone was expecting. The market has a way of doing the opposite of what the majority believes will happen. So, anticipate higher stock prices over the next several months. I am not sure how high it is going to go (obviously, no crystal ball), but I think 1000-1100 on the S&P is a reasonable estimate. At that point, I will definitely be looking to go short the market because I think people will realize by then that there will be no recovery. Stocks will have to come down to discount the highly overvalued levels.

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