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** Wait and See After Massive Sell-off -- by George Leong, B. Comm. -- Profit Confidential-- Calling the Trend Column, by George Leong, B. Comm. It was nasty on Monday for investors, as stock markets plummeted in a massive sell-off that drove major indices down between 7.0% and 11.85% in the case of the small-cap Russell 2000. The selling was triggered by a combination of an overbought stock market, given the five-day rally that saw the DOW rebound 19% from its recent low, and comments on Monday from the National Bureau of Economic Research suggesting that the U.S. has been in a recession since December 2007. While, until now, the U.S. recession was not technically considered to be one, we all knew the country's economy and numerous sectors were slowing and were subjected to reduced spending. The fact that only a small percentage of stocks are above their key moving averages is bearish. Investor sentiment continues to be extremely bearish and, unless we see a reversal in this, any rally would be questionable as to its sustainability. In our view, it will be important to see if stocks rebound after the fire sale. We will see some an immediate oversold reaction to the selling, but the key will be how stocks react in the upcoming sessions given the realization that the U.S. and global economic slowing would likely cripple our country as we move into 2009. The reality is that the news continues to be negative and supportive of buying. General Electric Company (NYSE/GE), a bellwether stock on the economy, reported on Tuesday that its fourth-quarter earnings would come in at the low end of its guidance. And, in the housing market, news from homebuilders and mortgage providers continues to be negative, indicating that the slump will continue. Our view is that you should hang tight and wait to see how things develop. Do not chase stocks higher, as we are not positive on stocks at this time. Capital preservation is key. You may want to start to look at some tax-loss selling as we move towards the end of the year. Profit Confidential --- http://www.profitconfidential.com/ LOMBARDI PUBLISHING CORPORATION News, Analysis, and Information Services Since 1986. One Million Customers in 141 Countries. Lombardi Publishing Corporation Financial Publications Division 350 Fifth Avenue, Suite 3304 New York, NY 10118-3304 --- Copyright 2008; Lombardi Publishing Corporation. All rights reserved. No part of this e-newsletter may be used or reproduced in any manner or means, including print, electronic, mechanical, or by any information storage and retrieval system whatsoever ,without written permission from the copyright holder. Source: Free Articles from ArticlesFactory.com
ABOUT THE AUTHORGeorge Leong, B. Comm., Senior Editor at Lombardi
Financial, has been a technical analyst for 12 years and a financial
analyst for seven years. His
overall market timing and trading knowledge is extensive. George
is the editor of several of Lombardi’s popular financial
newsletters, including The China Letter, Special
Situations, and Obscene Profits, among others.
He has written technical columns for stock market news web sites,
and he is the author of Quick Wealth Options Strategy and Mastering 7 Proven Options Strategies. Prior to
starting with Lombardi Financial, George was employed as an
analyst with Globe Information Services.
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