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  • Markets Going on Summer Vacation? 0 comments
    Jul 11, 2011 7:06 AM | about stocks: XOM, GS, CVX, COP, BTUUQ, ACIZQ, MEE
    Summer's in full swing in the USA, and no matter where you are you're probably already immersed in summer activities. Graduations, reunions, then much anticipated vacations and summer fun are on tap for many. What about the markets? We had the June swoon, where the major averages continued their downward trend from May, led or at least attended to by lots of worrisome news.

    There was the Greek debt drama, still ongoing, the still-weak US economy, with the pressured US consumer still walking on unsteady economic legs. High gas prices and still high unemployment took its toll. Earnings gains weren't as robust for many stocks and this trend might continue, as comparisons against last year's results will get tougher for many.

    Did the May sell-off which extended into June mean that the markets will be on vacation for the summer? Hardly. While the Stock Trader's Almanac details the historical precedent of more lackluster gains from May through November, it doesn't mean nothing is happening. Volume tends to slow down but not dry up. The new technologies with trading platforms as mobile as a smartphone app have led to people trading stocks while at the beach or at least not from their office. The lazy, hazy, crazy days of Summer, as the old Nat King Cole song goes, aren't quite as true for the markets as they used to be.

    This Summer's Market

    The end of spring saw the markets retreat from what was essentially a steady upward march beginning last fall. From roughly the 1,350 area the S & P found itself nearly down to 1,250 territory, a pullback in the 7% range. While this mimicked what had gone on in March, technical analysts are looking at this chart and calling for a summer rally, although according to investment writer Jim Jubak, it should be short lived. Jubak points out that while historically, June and August are relatively lousy months for the market, July has been better, the sixth best month of the year according to the Stock Trader's Almanac. Sixth best isn't great, but July should be better than June.

    Prices Down

    Whether you follow technical data or fundamental data or some combination of both, you can see that many stocks were oversold. As the price of oil declined to under $100 a barrel, which the chart below shows, the S & P also retreated as did stocks such as Exxon Mobil (NYSE: XOM). While there is hardly a straight line connection to all these performances, which are actually complex relationships, its' at least evident that whatever was happening to the S & P was certainly happening to Exxon and other stocks. Exxon's stock price took a sharp, albeit temporary trip into the $70s before rebounding and heading back up into the $80s.

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    You can see this rebound in many other stocks, obviously, as the S & P made its way back into the 1,300s, hitting 1,339.67 on July 1, the Friday before the long Fourth of July holiday weekend. And while it can be argued that the money has already been made in many of the stocks in this rebound or summer mini-rally, investors can still search out either bargain prices or stocks which are moving back up and should continue to edge up for a while.

    With Goldman Sachs' (NYSE: GS) longer term call for higher oil prices as well as a recent Barron's piece which touted $150 a barrel oil prices for next spring, the energy sector certainly bears watching. Investors should watch how big oil, the majors such as Chevron (NYSE: CVX), Conoco Phillips (NYSE: COP) and others react in their business and stock price to any spike in the price of crude.

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    Energy And Commodities

    Sector stocks which haven't fully rebounded yet but also bear watching are such areas as coal, with big names Peabody Energy (NYSE: BTU) finding its stock stuck in the mid-range of its 52-week prices, as well as Arch Coal (NYSE: ACI) languishing. These could be opportunities for a longer term horizon, say 6 to 12 months. The coal patch has seen a flurry of merger and acquisition activity, with Alpha Natural Resources (NYSE: ANR) gobbling up troubled Massey Energy (NYSE: MEE).

    Metallurgical or coking coal, used in steelmaking, is still in the early throes of a bull run, especially given the emerging market demand from China. Our China Stock Digest subscribers understand China's dynamic, fast-growing economy even if the mainstream financial media doesn't. And the steel industry in the US, which is almost always a late-cyclical recovery play coming out of a recession, still hasn't hit its stride yet.

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    The Summer's Window

    Stocks may be a bit cheaper than they were in the spring, but they're not yet that cheap, so this summer rally, if it comes, may not have the legs to go into the fall. So it's probably an opportunity best suited to shorter term traders. There are however, opportunities in dividend stocks, which our Dividend Genius subscribers will be keenly aware of, as many dividend payers have had their prices pounded down raising their yields to very attractive levels. Investors can avail themselves of some great choices. Whatever else you do, as an investor, make your summer a profitable one.

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    Global Profits Alert (GPA) is published by Trippon Financial Research, Inc. a financial media organization with offices in the United States, Hong Kong and Mainland China. GPA is written by Jim Trippon in conjunction with George Wolff, Sunny Wang, Todd Shriber, Kelley Damiani and J. Daryl Thompson.

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