Monday, 15 February 2010

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

Weekly Wrap

As you can see from the weekly chart, this week’s action was pretty choppy. The market closed higher for the week, but barely. It isn’t the type of week you would want to see if you think the February 5th intraday lows are going to hold. The market’s up and down motion for the week have a corrective type of pattern rather than an impulse pattern. I think the February 5th lows will probably be broken and the market is headed for further losses. Using the opening range of the month as a basis, the forecast for a decline in February is still valid. The bottom line is: Don’t go out buying stocks now, because the chances are high that they will move lower. I like buying stocks that are moving down, but I like to make sure they are getting close to making sustainable lows (whether it’s in the short-term or long-term). Right now, I don’t think we are close to a short-term (3-4 weeks) or long-term (1-2 years) low in the market. It seemed that Greece was the big story over the last week. Their debt problems are in full spotlight and everybody is talking about the repercussions if they default. The course that governments have taken around the world should tell us how that situation will be resolved. Greece will be bailed out and their crisis will be forgotten in a year. It was only a year and a few months ago that the US investment banks and money center banks were in the spotlight. Those banks have not fixed any of the problems they had. They have only concealed them. Greece is a symptom of a larger problem within the global economic system. At some point credit expansion becomes a hindrance rather than an engine for growth. The ability to service the debt becomes a problem when a large portion of your outgoings are going to pay off creditors. The consequence of these rescues, bailouts, and irresponsible lending will be felt one way or the other. It will be interesting to see how it turns out. Well, the US has a new stimulus bill being introduced to rejuvenate the economy. The question has to be asked, “How many stimuli do you need to get the economy going?” That raises a second question, “How many stimuli do you need to do before you realize it isn’t working?” Someone should ask the people working in both chambers of the House and the head of the Executive branch of the US. In other news, there are some provisions that are trying to be slipped into the 3rd proposed stimulus bill without anyone asking any question according to this Bloomberg article. So, are people coming out of their shells and starting to spend again? The Advance Retail Sales report for January was positive. It was up 0.5%. The consensus was 0.3%, so it beat the estimates. You can probably get an accurate picture of consumer demand by asking your friends and neighbors if they are shopping. An even better way is to look at your own spending habits. If you are spending less money on shopping than two years ago, you can imagine what everybody else is doing in an economy where unemployment is 9%+. Speaking of the economy, last week the GDP for Europe (i.e. Eurozone) was 0.1%. 0.1% is not growth. It’s standing still. Although, most of the pundits are saying that a global recovery is taking place, I don’t think 0.1% adds much credence to their claims. Despite the recent pull back in the market since mid-January there are still some stocks making new highs from the March lows. I don’t advocate buying stocks hitting new highs. It’s just my preference not to buy at peaks, and to wait for the inevitable pullbacks. Stocks making new highs are certainly candidates for putting on a watch list. Just a few names on that potential watch list are VRX, LCC, UTI, UVV, TSN, SNS, SLE, ROK, RSC, RMD, RBC, PLT, PIR, PBT, NVO, LII, IDT, EMS, DLB, CEL, BRK.A, and ACF. Keep in mind that these stocks are in the middle of big moves, and the meat of it might be gone.

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