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Denis Ouellet
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Denis Ouellet has been involved in the Financial sector since 1975. Now retired, he is a part-time blogger. Denis has been analyst and head of research for a brokerage company, equity manager for various investment organizations (pension, mutual and hedge funds), head of global equity... More
My company:
Fidanza Publishing
My blog:
BEARNOBULL
  • GREEN LIGHT ON EQUITIES 0 comments
    Dec 18, 2012 9:32 AM | about stocks: SPY

    I am partly re-committing to equities after having been cautious since April 2012.

    • The S&P 500 Index is 25% undervalued based on the Rule of 20.
    • Earnings have peaked but are not collapsing like in 2007.
    • Inflation has slowed and seems unlikely to re-accelerate soon.
    • The U.S. economy remains ok. Avoiding the fiscal cliff removes a big short term threat. Christmas sales look ok.
    • Oil prices are not a big threat although Middle East tensions remain.
    • The Fed keeps pumping.
    • China is not hard landing, actually showing signs of re-acceleration.
    • Europe remains in poor shape but the ECB will act as a backstop if things get worse.
    • Technically, U.S. equities look good with stocks above the rising 100-day and the 200-day moving averages. Technical downside is 1390 on the S&P 500, -3.3% from the current 1438 level.
    • Not a slam dunk but, all in all, the risk/reward ratio is very favorable and many catalysts are turning positive.

    Larger Rule of 20 chart here.

    (click to enlarge)

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Stocks: SPY
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