So, the past few days have been cool ones for the Dow Jones Industrial Average Index. The market saw a nice uptrend. Click here and set the Dow to the one-month timeframe; that graph says it all. It looks like things may be okay from now on, right? Well, don't bet on it. CNBC.com reminds us about the dreaded bear-market rally. And I completely agree with the thesis: we are most likely headed back down once this market happiness runs its course.
It would simply be too easy for investors to have seen the bottom. No way, not with all the problems going on in terms of inflation and financial disasters. Oh yeah, oil has retreated, that's true, but I don't think the energy monster is in permanent hibernation. Not by a long shot. The problem with the past few days is that it plays with investors' emotions. It's played with mine, certainly. I haven't bought a stock in a while, and I really want to buy something. Maybe add to my General Electric (NYSE: GE) trade, my Coca-Cola (NYSE: KO) holding. I love the dip in Microsoft (NASDAQ: MSFT) and really want to get serious about grabbing shares in Mr. Softy. My 401(k) has a lot of money waiting to be put to work. I want to transfer some of those monies into one or two of the quality mutual-fund offerings at my disposal. I can't stand having money tied up in stable-value instruments.
I just can't make a move yet. I feel that lower prices will be upon us sooner rather than later. Already, many are talking about buying opportunities for oil futures, and I fear those who hold such opinion will turn out to be correct. When oil rises again, stocks will most likely fall, and this summer fun will be just another memory of a day at the beach. I'm not saying there aren't buys out there. Again, Microsoft is looking attractive. Value investing, however, isn't. It's not the style of the day. And when value investing isn't the style of the day, your only hope is to become a deep-value investor and pray that patience is eventually rewarded.
Am I being pessimistic? I'm being realistic. The economy is still unstable. Even the great Google (NASDAQ: GOOG) isn't immune. So, while I can't say I won't nibble here and there on some stocks next week, I can say what was I feeling most strongly as I saw the Dow climb: maybe it's time to buy the DXD (AMEX: DXD) ETF to short the index. It would be risky to do this, of course, but my main point is that I still feel bearish on the Dow even with the recent rise.
Disclosure: I own Coke and GE; positions can change at any time.
Closing Bell: Economic Catapult for Thanksgiving & Black Friday (WMT, TGT, GRMN, GOOG, MSFT)
Deere up on Q4 earnings performance
Reid Hoffman: LinkedIn will go public (at some point)
Reader Comments (Page 1 of 1)
7-19-2008 @ 12:43PM
william lindblad said...
While I agree with you and expect more downside to the stock markets worldwide, I also feel that our government has a vested interest in keeping the ones in the U.S. stable. Just how long they can get away with this (they are doing it) remains to be seen.
As you say, there are MANY pressures and most are on the consumer and expendable income. With a large part of the population this ranges from non-existent to slowly disappearing. This is an area in which the government has little effect beyond incentive checks. For fuel prices to have any positive effect the price of oil has to drop further, perhaps to the 110 range. I find this highly doubtful and expect the trend will be in the opposite direction comes Monday. At present there is a tropical wave brewing in the islands and should it become a storm likely to head into the gulf? The dollar/euro disparity is still present and it's effect is weighing heavy on Europe.
In short, with just what is known - it's hard to be an optimist. Even harder, when you consider what is thought to be still out there in the financial area.
7-20-2008 @ 12:11PM
Tom said...
Sure seems to me that this is a market pushed around by shorts and traders and not by a financial economy. Lots of excesses and problems yet to be worked out. I'd be very cautious, careful.
7-20-2008 @ 1:48PM
Americas Watchdog said...
We have Americas Watchdog & you are all so right. Regardless of what oil does, our nation has yet to see the worst of the real estate mess. We are now looking at 2009 at the make or break year for the US economy. We expect an additional 10% decrease in US home values in the US in 2009, with states like California taking a brutal 15%+ in lost equity.
CNBC's Larry--& drill, drill, drill, must be smoking crack. Regardless of what oil does, we see this drama getting worse.
The really big question to us is what happens to the US economy if suddenly oil bounces back and we see $150 or more? Then we are really in the soup.
7-20-2008 @ 9:22PM
MERRILL SUHR said...
MSFT STEVE BALLMER SAID YOU CAN DO A LOT WITH 50B
HOW ABOUT RAISING THE DIVIDEND TO A $1
7-20-2008 @ 10:16PM
Jeff, DE said...
oh please, just another short gloom and doom crappola, hooo hummm...
7-23-2008 @ 6:07AM
Audie Moore said...
Too many Analysists guess what will be - - they never give any factual data to support their position. Just say it and that makes a panic for the investor. Why can't they give some factual data to support their position?
Audie Moore