Home About Archives RSS Feed

@theMarket: The Coast Is Clear

Bill Schmick

The stock market continues to be buffeted by bad news. Energy prices are climbing, war rages in Libya, Japan's nuclear crisis continues to radiate and Portugal's government resigned after failing to push through austerity measures intended to avert a financial crisis. The stock market simply shrugs it off and moves higher.

Pay attention readers. When markets continue to absorb negative news, the tea leaves tell me stocks are going higher. Last week, I wondered if the correction was over. The answer is yes. Some arcane variables I follow are flashing green. For example, market breath (the number of advancing stocks versus decliners) has made a sharp reversal over the last 10 days, which is a good sign. In addition, the percentage of stocks that are now above their 50-day moving average stands at 57 percent. If history is any guide that indicates we will enjoy a strong multimonth rally.

"But how can the very same worries that sank the market as recently as a week ago now no longer matter?" protested a snowbird with a summer house in Becket, who was convinced the world was coming to an end just a few days ago.

Markets tend to discount bad news and price in numerous "what if" scenarios over time. The European banking crisis has been with us for well over a year, so Portugal's problems no longer have the power to ratchet up risk on a worldwide basis. It would take serious financial problems in a really large country such as Italy or Spain to roil world markets down the road.

In the Middle East, the protests in Tunisia began in December of last year. Four months later, investors, who initially feared this unrest might spread to Saudi Arabia, now believe that if it were going to happen, it would have done so by now. Sure, oil will still remain at the $100 to $110 a barrel level until hostilities in Libya subside, but the rest of the market is already focusing on other things.

Finally, Japan, the world's most recent crisis, is far from over, but the inflated fears of a nuclear holocaust that drove the markets lower two weeks ago have been punctured leaving a mess (see this week's column "Who Pays for Japan?") but not one that will sink the world's markets. And in the meantime, U.S. GDP was revised upward for the last quarter of 2010 to 3.1 percent. Interest rates remain at historically low levels, and the economy appears to be gaining strength.

What we have had is a good old correction. Now it is over. Valuations are considerably lower (on average 7 percent) which has reduced the premiums in the equity market to a reasonable level. I believe the markets are poised to move substantially higher from here as I have written several times in the past. It appears the same cast of characters — materials, food, technology, industrials and energy — will lead the markets higher. Invest accordingly.

Bill Schmick is an independent investor with Berkshire Money Management. (See "About" for more information.) None of the information presented in any of these articles is intended to be and should not be construed as an endorsement of BMM or a solicitation to become a client of BMM. The reader should not assume that any strategies, or specific investments discussed are employed, bought, sold or held by BMM. Direct your inquiries to Bill at 1-888-232-6072 (toll free) or e-mail him at wschmick@fairpoint.net. Visit www.afewdollarsmore.com for more of Bill's insights.

0 Comments
Tags: Japan, energy, correction      

Support Local News

We show up at hurricanes, budget meetings, high school games, accidents, fires and community events. We show up at celebrations and tragedies and everything in between. We show up so our readers can learn about pivotal events that affect their communities and their lives.

How important is local news to you? You can support independent, unbiased journalism and help iBerkshires grow for as a little as the cost of a cup of coffee a week.

News Headlines
South County Opioid Working Group Receives Grant
Lever, North Adams Awarded Grant To Support Mohawk Trail Woodlands Partnership
RMV Renews Over 163,000 Licenses And IDs Online During REAL ID Promotion
Williamstown Fire District Signs Deal on Tanker Truck
CPA Committee Outline Upcoming Grant Cycle
Smoking Materials Believed Cause of Pittsfield Fire
Archambault Leads Wahconah to Fall Ball Win over Mount Greylock
Q&A: Pothier Tickled Pink To Still Be Wearing Blue
Pittsfield COVID-19 Cases Trending Down
COVID-19 Cases Increasing in Adams
 


Categories:
@theMarket (343)
Independent Investor (450)
Retired Investor (13)
Archives:
September 2020 (4)
September 2019 (2)
August 2020 (6)
July 2020 (10)
June 2020 (7)
May 2020 (9)
April 2020 (9)
March 2020 (5)
February 2020 (7)
January 2020 (10)
December 2019 (7)
November 2019 (8)
October 2019 (9)
Tags:
Bailout Retirement Banks Recession Pullback Stock Market Debt Ceiling Economy Greece Energy Euro Jobs Metals Europe Rally Fiscal Cliff Stimulus Oil Housing Stocks Markets Election Deficit Selloff Federal Reserve Interest Rates Congress Debt Crisis Currency Japan Taxes Europe Wall Street Commodities
Popular Entries:
The Independent Investor: Don't Fight the Fed
@theMarket: QE II Supports the Markets
The Independent Investor: Understanding the Foreclosure Scandal
@theMarket: Markets Are Going Higher
The Independent Investor: Does Cash Mean Currencies?
The Independent Investor: General Motors — Back to the Future
@theMarket: Economy Sputters, Stocks Stutter
The Independent Investor: How Will Wall Street II Play on Main Street?
The Independent Investor: Why Are Interest Rates Rising?
The Independent Investor: Will the Municipal Bond Massacre Continue?
Recent Entries:
@theMarket: Investors Face a Rollercoaster Ride
The Retired Investor: Bicycles Sales Are Booming
The Retired Investor: CSAs & Local Farms Make a Comeback
The Retired Investor: Mask Mania Helps Small Business
@theMarket: Markets Reach for the Sky
The Retired Investor: The Drive-In Returns
@theMarket: Market's Window Getting Smaller
The Retired Investor: Home Is Where the Hammer Is
@theMarket: The Economy Versus the Stock Market
The Retired Investor: Tensions With China May Heat Up