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Lange Financial Services ” Market Call” Update. Out Of The Economic Slowdown Patch. Bullish. What To Do In The Markets Now.


In late April , as the market was peaking after a strong six weeks into excellent earnings reports, we stated on the site that a 3%-5% correction was now a realistic expectation. From a peak of Dow 12,875 and 1371 in the S&P 500 ,these indexes declined by about 4.5% reaching lows of 12,310 and 1311 respectively last week in the middle of the fourth consecutive down week. At that point, an increasing number of stocks started to bottom and turn upward.

Many stocks during the four-week pullback in May declined about 10% from recent peaks, permitting the opportunity
to accumulate stocks during the weakness and establish a good average price. This is the cornerstone of our investment philosophy.

While some further consolidation/trading range action is, probable we do not see much overall risk at this juncture. We could easily see some short term volatility however due to the Greek/ European Debt Concerns ( Austerity Programs). We believe the economic soft patch that literally everyone is so highly concerned about seems largely over. Some factors that caused the slowdown and are likely to be reversed include:

1) Lower gas prices as we move into the summer.

2) Economic recovery in Japan.

3) An improved supply chain for the auto and electronic industries.

4) Resumption of Global Economic Growth

Significant economic growth is expected in the second half of 2011, carrying into 2012. Last year, as the market made the July/ August low, a double dip was a widespread concern keeping many investors on the sidelines. As the consolidation/trading range runs its course. we expect higher equity prices overall into year-end. Keep in mind that equity valuations are historically low at about 12 times projections for the S&P into 2012. Our target for the S&P 500 Index remains at 1550.00 with projected earnings of $110 in 2012. Gridlock, our theme well before the 2011 mid term elections, is alive and well. We believe Gridlock will continue to bring about positive benefits to the markets as we enter the 2012 Presidential election season. We remain positive on the equity outlook and that the risk is in not being long quality stocks with a good average purchase price.

We would view any weakness as a good opportunity to increase or establish positions in companies that promise steady earnings improvement. We are reiterating our list of ” Favored Stocks ” below.

Apple, Inc. AAPL

Alpha Natural ANR

Anadarko APC

Apache Energy APA

American Express AXP

Peabody Energy BTU

Cliffs Natural CLF

Deckers Outdoors DECK

Devon Energy DVN

Exxon Mobile XOM

Federal Express FDX

F5 Networks FFIV

Google GOOG


Marriott MAR

McDonalds MCD

MetLife MET

3M, Inc. MMM

Oracle ORCL

Qualcomm QCOM

Sandisk SNDK

Schlumberger SLB

Starwood Hotels HOT


Wellpoint WLP

Walters Energy WLT