Sunday, 23 August 2009

Weekly Wrap: Your source for stock, stock market, and stocks info

Weekly Wrap: Well, well, well the Dow Jones Industrial Average, S&P 500, and NASDAQ are all at new recovery highs. If you have been stupefied at the ever-relentless rise of the major indices with a meaningful pullback or moderate correction, you are not alone. Even the professionals are dumb-founded by what is going on in these markets. Some say, that the is the most tumultuous market environment they have ever seen in their entire careers. Trying to forecast and predict what the market will do over the next year has been nearly impossible, but not completely impossible. Back in February and March, it didn’t take a genius to figure out that the market was going to have a sizable bounce because there was so much negativity and pessimism about the markets and economy. This is how markets work. They get negative and oversold, and this is precisely when you MUST buy. And when they get giddy and overbought, this is precisely when you MUST sell. So, what do we have now. It looks like optimism about recovery is running rampant. Every mainstream media outlet is saying the recovery is around the corner and the good times are coming back. Is this true? Probably not, because you could probably make money, if you did the exact opposite of what the mainstream media says. It’s just the contrarian nature of being a good trader/investor. So, to make money, you have to be ahead of the crowd. And right now, I am starting to get a little bit uncomfortable with the meteoric rise of the markets off of the March lows. Markets never go straight up and they never go straight down forever. So you can be assured that the market will run out of steam on the upside. I want to be early in inform you that if you have long positions in the market, it may be time to start lightening up on your positions or even outright liquidation because I believe the markets probably have (maybe) another 2 months on the upside before reality hits. There isn’t going to be any recovery this fall. And for people who maybe just started to get back into the market in the last few weeks, will probably be the ones hurt the most by the coming decline. The coming decline will be swift. In the beginning, the mainstream media will say it’s just a correction and that it is constructive and healthy for the market to correct. But then the selling will start heating up on the downside, and they will ask, ”Why is the market going down, if there is a recovery on the way?” Then, the market will head lower (by then, the market will be down considerably) and they will start to doubt whether the recovery is coming. And lastly, they will realize that the recession continues and that the preceding market rise was just a bear market rally. That’s how these things go. Stay ahead of the news by watching the market. I think the market rally is definitely in its last legs now, and I am preparing to sell my long position and even start putting on short positions. Some news last week, house prices rose in July 7.2% in the US. Apparently, for four months in a row. Meanwhile, delinquency and foreclosures are still hitting brand new records every day. Is the housing market in the US hitting bottom? I don’t know, but I still think it’s too early to start thinking about buying a house. Prices have come down a lot, but if you want to be sure you are getting bargain basement prices, I would wait another 2 years. Oil prices hit $74.72 last week high. It hasn’t even been confirmed that the economy is growing in the US and oil hit back at $74. Wow! Just think where oil will be when the economy is growing at a good pace again. Say hello to triple digit oil prices again. Maybe not this year, but certainly in the next decade. Speaking of oil, natural gas is getting crushed. I have no idea why natural gas is going down some much. It hit a seven year low last week at $2.80 per mil Btu. Do people still use natural gas? Of course they do, so it makes no sense to me. But there is an opportunity there. When things get so out of favor or so low, it starts becoming an attractive situation to invest in. “Value for money”. Natural gas is “value for money”. Could it go lower, yeah, probably. But it’s pretty damn low. I’ll finish with Ben Bernanke. He likes to print money. He also likes to make us feel better by telling us “everything will be ok” because we will just “print money” if we have problems. In Jackson Hole, Wyoming, “that the U.S. is on the cusp of recovery after a long, brutal recession and the worst financial crisis since the Great Depression.” Really, this is coming from the guy who said the subprime crisis was contained. The same guy who said house prices will stabilize in early 2007. The same guy who said the economy wouldn’t experience a recession in 2007. And we are supposed to TRUST him when he says the nation is on the cusp of recovery? I would give too much credence to what that guy says, what do you think?!!

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