Market Update - July 15th, 2010 - Investor X

MARKET UPDATE 

July 15th, 2010 

Investor X 

Yesterday I ended the Market Update with the following statement: 

“If aluminum is a proxy for the overall health of the economy going foreword, what is the real message being broadcast here? In my opinion, it is showing weakness in the overall economy and that will become apparent by other numbers and statistics as they are reported. Stay tuned; we may be watching a whip saw unfolding here.” 

Today some of those conflicting numbers were reported, which are indicating deflation and a slowing economy ahead: 

NEW YORK (Dow Jones)--U.S. stocks skidded Thursday after a barrage of largely negative economic data stunted enthusiasm over the recent spate of strong corporate earnings. 

NEW YORK (MarketWatch) -- U.S. stocks dropped sharply on Thursday after another economic report, this one on manufacturing in the Philadelphia region, dimmed views of the recovery.... 

Producer prices fell for a third straight month in June...U.S. stock markets headed lower Thursday morning after the Labor Department said producer prices fell 0.5 percent June, signaling a slow economy. 

BEIJING (Dow Jones)--Steel product prices in China are falling close to cost price for producers and only some of the biggest domestic steelmakers will be able to squeeze out a profit on their goods, a senior Chinese steel official said Thursday. 

The above news indicates deflation and a double dip (depression). Lowering estimates before companies report bad earnings is an old trick that has been used by Wall Street for years. It works quite well in a growing economy and a bull market. However, we are in a shrinking economy and a bear market and so my expectation is that these old tricks will not work in this environment, because there are too many statistical tracks that must be covered in order for it to work. We will see – stay tuned for more economic data in the coming weeks. 

Regards,

Investor X

__________________________________

What do you think about this post? 

Let us know in the comments 

__________________________________ 

If you enjoyed this post why not subscribe to the RSS Feed or email? 

Market Update - July 7, 2010 - Investor X

MARKET UPDATE
July 7, 2010
Investor X 

The market appears to be much closer to the end of the current upward correction than it is to the beginning of the correction. In my opinion an attempt to sell out short positions at the beginning of the correction would have been problematic because, as I mentioned in my previous update, that would have necessitated being right on the sell decision and then being right again on the buy decision for such a strategy to work out. The best way to take advantage of these minor upward corrections, in my opinion, is to add to existing short positions toward the upper end of the rebounds. This requires that you be correct only one time.

I am currently taking some classes that are consuming most of my daytime hours. This will continue through most of August and therefore I will not have the time to be as active in sending market updates unless it appears that the market action warrants an explanation or when the markets get close to the end of the current decline. At that point a multi month rebound should occur prior to the major decline resuming (By the way, when you begin seeing a lot of Market Updates, that is probably indicative that a transition is underway. I typically do not write as many updates once the transition has occurred and a new trend is underway). I plan to sell my trading positions and perhaps a portion of the core holdings in my conservative portfolio and all of my short positions in my aggressive portfolio during that transition. The current downward trend should last for another month or more and erase another 1,300 to 2,000 points before it is complete. Then I would expect the next major rebound to begin. For the most part I have bought in the majority of my short positions and therefore, there is nothing to do over the course of the next month or so but patiently wait for the market to do its thing.

Regards,

Investor X

__________________________________

What do you think about this post? 

Let us know in the comments 

__________________________________

* If you enjoyed this post why not subscribe to the RSS Feed or email?