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A trade and a comment…

I am selling BIG at $33 today.  BIG is a short-term momentum stock that is up about 6.5% from where I purchased it.  I am not holding it because the chart is showing signs of a bearish pattern.  I have a few stocks on my list to purchase but they require a little more research…stay tuned.

 I have decided to hold onto X.  Even though the fundamentals have not met my standards, the price action seems extremely favorable.   And, congratulations if you bought ORCL after my post on Friday.  You are up about 6% today. 

Here are some (Bullish) comments from Tobias to keep you optimistic. 

“The late-year 2010 rally is very likely for several reasons. While investors fret about earnings trends, economic uncertainty, unemployment woes, home prices, taxation policies, European austerity and sustained outflows from equity mutual funds, to name a few concerns, several indicators argue for a stock market resurgence including sentiment and valuation indicators. Indeed, our unique Panic/Euphoria Model dipped into “panic” territory three months ago and this predictive measure argues for a 90% chance of market gains within six months.
Deficit reduction hints may be critical factors in restoring confidence. It seems as if investors need to see a credible path towards fiscal responsibility emerge in order to believe that Treasury yields will not surge as funding costs could significantly impact future GDP growth and corporate investment decision making. Several milestones including the midterm elections, the bipartisan deficit reduction committee’s report and the pending expiration of the Bush tax cuts are likely to provide insight into America’s ability to tackle this overarching issue.
Better 2011 earnings visibility should ease investor anxiety. One key problem is conviction in the 2011 EPS forecasts with margin pressures appearing on the horizon while some leading indicators suggest that there are risks to future business trends. Bank lending standards provide a good backdrop but corporate guidance later in the year should be helpful in bolstering conviction amongst fund managers. Such guidance is unlikely to come out until late October.
The lack of a dreaded double dip emerging should allow for stock appreciation. Investors have been deeply worried about the double dip scenario and time will tell if that angst is justified. Moderation in growth has been expected but any evidence that runs contrary to the double dip scenario as the next few weeks go by should alleviate this particular fear with the recent ISM report, for instance, reversing some of the seeming despair of late August.
Clarity on the Bush tax cuts also could help reduce uncertainty. The Bush tax cuts expiration and its implications loom with investors seemingly wanting some sense of its future. The midterm elections may provide more insight on this front as consensus may be required to get any new bill across the legislative finish line. A deal is likely given underlying economic fragility but its structure needs to be known.
The Shanghai lead also supports S&P 500 strength. The Shanghai stock market has been a three-month lead indicator for US equities over the past several years and its recent ability to rebound from early July lows bodes well for the S&P 500. Given the very substantial effect of China’s growth on global GDP, such a lead-lag relationship is reasonable though still misunderstood.”

For now, I am of the mindset that we are trading sideways to slightly positive for the year. 

Good Luck,

Terry Monahan
Cincinnati, Ohio