Thursday, July 12, 2012

It's OK To Stay On The Sideline For Now

The market sentiment has been weak these last few days.  With that said traders should have taken profits or shorted the market during the end of June; I know I did.  Since the Recession began the Dow has had a hard time hitting 13,000 and when it does it faces some tough resistance.  Slow growth data from major players around the globe was a good hint to sell when the Dow came close to hitting the13,000 mark once again at the beginning of the month, it was surprising it got so close given the global economic state we are in.

Too many uncertainties and bad news are reason enough for investors to take a moment to plan their next move.  Taking a look from the outside gives an investor a relaxed point of view.  Investors have to digest the possibility of another U.S. credit downgrade, double dip recession and possibly a lost decade.  Some believe we never really came out of the recession.  Most of Europe is sporting interest rates below 2.00% and other major countries have been cutting their rates.  It appears they are preparing for a tough financial environment.  Investors may just watch what the market will do next in terms of U.S. data and stimulus as well as the presidential elections.  If the market drops it may be a good opportunity to start picking up high dividend yielding stocks - interest rates are so low it has become hard to get decent returns.  With 10 yr treasuries (^TNX) yielding 1.48 an investor is better off in cash waiting to get in on a good stock.

Entering or exiting the market at the right time is essential for profit making.  The market may seem cheap to some investors out there but given the data and the way the world is positioned I would reconsider.  The market can move violently on fear, the official announcement of a U.S. double dip recession won't be pretty people have had it with daily news about the euro crisis and the high unemployment in the U.S. it has been 5 years since the recession started and 3 years since it ended. 

Real estate has not been improving at a quick enough pace, for the 1st quarter of 2012 property sales were showing signs of either no improvement or very slow progress.  According to Jones Lang LaSalle 2012 review "Vacancy levels continue to drop nationally in trophy and Class A properties in 2011; yet, with the exception of markets spurred by technology, energy and healthcare demands, they have a way to go before witnessing the lows of 2006," said John Sikaitis, Director of U.S. Office Research.

An investor should not be entering trades in haste, cash is good right now if anything the dollar is worth more now with currencies depreciating to the almighty dollar.  On the other hand a strong dollar can hurt U.S. companies, waiting for earnings reports to give us a clearer picture is a good way to sit it out until  the environment gets a little more safe to take positions.  The market seems to be signaling more news on the bearish side at any moment we could get a summer crash just like 2011 and as it is said it is best to buy stock when there is still blood on the street.  I don't feel that confident buying just yet as the global data could send us into a bear market even after another round of stimulus.  The Fed did not state it will implement Q3.  But as Nouriel Roubini states in his Bloomberg TV interview the Fed may already be out of effective cures to aid our hurting economy. 

At this point it is about strategically entering the market and analyzing world data to get a good buy or sell.  Although most data signals trouble not all the news out is bad, initial claims for state unemployment benefits in the United States have dropped to a four year low.

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