The markets are now far oversold short term. That does not mean they will go up. However, it pays to be prepared for what might happen. The European markets could go up tomorrow if the German parliament (as expected) approves the bailout package. This might stabilize Europe in the short term. Oil is oversold. It is primed for at least a short term rebound as we move to the new month for futures contracts. I could go on, but none of these reasons guarantee we will get a bounce. Traders will be able to tell better Friday morning. I have identified a few stocks that should surge on a rebound: WHR, HPQ, CSCO, FSLR, and PCLN.
WHR -- great recent results. Most growth came from the Americas and Asia. It has perhaps fallen inappropriately. It should bounce on any bounce.
HPQ -- great results. CEO Mark Hurd did not think European business was going to get hurt much even in a slowdown.
CSCO -- great results. It got hit because it did not raise FY2010 guidance. However, the CSCO fiscal year ends at the end of July. Chambers was likely being conservative as always. With only one quarter to go, he likely wanted to keep some wiggle room for CSCO. They take pride in beating virtually every quarter. Plus CSCO has a huge cash position (over $30B). Historically the company has used this to purchase other companies on the cheap in recovery years. CSCO is likely to do that again this year. The acquisitions usually add to the bottom line. CSCO has already announced two small acquisitions (since earnings) in the last week. Both seemed good strategic moves. There will be many more. The odds are good CSCO will beat estimates for the rest of 2010 (our year). CSCO may beat them by a good margin if it makes some good sized acquisitions.
FSLR -- a good solar company. Europe is a huge solar market. FSLR has been beaten down on speculation that that market may be in trouble. Any good news out of Europe could cause a short term bounce in FSLR.
PCLN -- a top performer recently. It has been hit by the ash cloud, and the glum outlook for Europe. It is far oversold. Any good news in Europe could cause this to bounce significantly in the short term (Friday).
Two companies that do a lot of their business in Europe (approx. 47%) are FLS and PCAR. Any good news from Europe should send these two up short term.
Warning: I am not guaranteeing the market will go up tomorrow. The trend has been down. But the markets rarely go straight down. It doesn’t seem to me that this is quite the fall of 2008 scenario. Europe is reacting more quickly than the US did. It could still succeed to a large extent. A bounce on good news is probable, but not a sure thing. The emotion of the market can be hard to gauge. I don’t pretend to be the most expert at this.
Good luck trading.
Disclosure: I have a small long position in CSCO