Sunday, August 19, 2012

Is Now A Good Time To Buy Stocks?

The rally we have seen throughout August may continue into September but a correction may take place and that alone should be a warning sign.  Investors that did not get into the market while the Dow Jones Industrial Average (^DJI) was in the 12000's best stay on the sideline to wait if the Dow can build some strong support in the 13k range.  During the past year the Dow Jones has touched the 13000 mark three times in all three it has faced major resistance at 13300 and eventually returned to the 12k range.  I would not recommend shorting the market just yet, if the Fed decides on more stimulus or not is a major market mover and you don't want to be on the wrong side of that bet. 

The 10 Year T-Note (^TNX) at 1.82% doesn't seem too attractive even with inflation at 1.40%.  Waiting appears to be the better alternative a stock dividend is currently the best financial instrument to preserve wealth.  Although stocks are the best alternative the wealthy are getting tired of the uncertainty and the violent roller coaster rides that we have experienced through out the recession and the recovery phase.  The wealthy are mostly staying in cash for the time being, they do not want to risk losing large chunks of wealth in a small time frame.  The low volume the market has experienced is another sign of caution. 

The global economy is not giving signs of strong improvement making investors more risk averse.  Despite the economic weather global stock indexes have rallied.  The Euro STOXX 50 rallied 234 points during the last 30 days closing at 2,471.53.  The Shanghai Composite Index declined 54 points during the last month closing at 2,114.89.  The NIKKEI 225 rallied 493 points in the last 30 days closing at 9,162.50.  The DAX has rallied 411 points closing on Friday at 7,040.88.  The CAC 40 stocks list on the Paris Bourse has rallied 294 points in the last 30 days closing at 3,488.38.  The BOVESPA has rallied 4888 points in the last 30 days closing at 59,082.37.  The FTSE 100 has rallied 201 points in the last 30 days closing at 5,852.42.

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