Will the market make it four days straight? With all the issues out there, can it put together another winning day? I don’t know if the market will end up in the green today, but one thing it won’t do is tank. Whoa! Nix on the certainty thing. What I meant to say is that it appears the market will not tank today, and the reason is the same reason I wrote about earlier in the week – the market now understands that a double-dip recession is not likely in the next quarter. Although the economic indicators are not blowing off any roofs, they have reversed the direction of the July and August numbers. And then, there are these numbers …
Thomson Reuters says same-stores sales at the 23 big retailers it tracks were up 5.1 percent in September 2011 from last year, putting a cap on the best back-to-school shopping season since 2006.
The many analysts who told us the “back-to-school shopping season” would not be strong should reconsider their careers, or at least reconsider how they compute and present their analyses. The point is that some key indicators of economic activity were stronger in September – retail sales, big-ticket sales, manufacturing, and employment, for example. True, the service sector numbers were weaker and the housing market is still in the dump, and both of these areas are key to a full recovery, but, hey, no one is saying we are out of the woods. No, we are just not going deeper into the woods, at least not for now.
Okay, so if recession is off the table and European policy makers keep dancing around the debt crisis, this leaves us with a market continuing its range-bound behavior. In fact, since August 8th, the market has shown a consistent pattern. Swing traders should be doing quite nicely, as the range is clear with reasonably defined tops and bottoms – buy at 1070-1100 on the S&P 500 and sell between 1150 and 1175. I expect this to continue until we get some definitive action toward resolution of the debt issues in Europe, and that looks to be coming much sooner rather than much later. Depending on the “resolution,” the breakout could be to the upside or to the down. All eyes are on Europe now – will the policy makers let Greece default or will they get it together and do what needs to be done to contain the crisis? Now, onto something completely different, sort of.
I know my credibility on the following is suspect, since I suggested at the first of this year that you watch the financial sector for opportunity. I said look to the cheapest of the big banks and wait for a good entry. Well, the year has been long with the European crisis and all, and the financials have presented entry points, and I have bought, but this sector is now beaten down from investor uncertainty about exposure to Europe. Now, one way up is a positive resolution in Europe. Anything else will wreak havoc on the sector. So, here it is – do you buy now on the belief that European policy makers will get it right? If you bet on this belief, the payoff could be huge. Then again, analysts are predicting weaker earnings from the banks. Even if Europe resolves “nicely,” it might be a long road up for the banks because financial regulation has altered their earning streams. So, does anyone feel like gambling?
Trade in the day – Invest in your life …
