Head Fake?

Yesterday, the market recovered from some early losses to finished mixed.  Today, the futures were down almost 100 and then Bernanke came on television and wouldn’t you know it, the market began to recover.  Amazing.  We bounced around for a while and then the indices started to move up stronger.  Then Treasury Secretary Paulson came on television and I thought “Uh oh!”  See, I’ve noticed everytime over the past year or so that President Bush, Chairman Bernanke, or Treasury Secretary Paulson come on television the market falls.  But, not today.  It actually got stronger.  That must mean we’re oversold and ready to move higher.

Oil has now shaved off $10 per barrel and agriculturlual commodities have been hit hard the last two days.  So, even if it’s temporary, this gives investors a morale boost.  And again, when you’re oversold like we are, the market takes any positive and runs with it.  But, here’s my main concern.  Every rally in 2008 that has been led by financials and “value” stocks has been a sucker rally.  Especially when material stocks are the source of funds. In other words, today we saw money come from material stocks and into other beaten down sectors.  Is that what a new bull market looks like?  No.  

But, I do believe it’s worth dipping our toe by either taking off some of our short position and/or getting more long by making some purchases.  I don’t believe this is the start of something big, but it does smell like a rally that can be worth participating in.  I hear a lot of people right now talking about not enough fear (me being one of them).  With all these people doubting that we’re at a bottom (even tradeable bottom) because there isn’t enough fear, maybe that’s all we need.

I’m still going to continue to watch the global growth stocks for good entry points.  Look at coal, natural gas, energy, agribusiness, emerging markets, and global engineering firms.  Many of these stocks are down 25% just in July!  Their fundamentals haven’t changed a bit.  Sure, some of them got ahead of themselves.  But, 25% in just a handful of trading days.  Seems like a little too much to me.

I added to my General Electric (GE) position today as this stock is in the middle of everything.  Great company that is just too cheap.  This is one I’m parking and putting away on the shelf.

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July 2008
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