A Weak Bounce

Many of the indicators I watch are getting to the point where we should (key word should) have a rally over the next few days.  We’ve now had almost a 10% correction and the bulls will come in and start buying some “bargains”.  This rally could take us to Dow 8500 or so before we start heading back down.  You’re hearing a lot about earnings season around the corner and how that will impact the market.  I’m sure it’ll be a mixed bag.  Should companies get rewarded if their earnings were $5.00 per share last year and then last quarter they fell to $2.00 per share but are back to $2.30?  The headline will read earnings are up 15% when really they are down almost 50% from a year ago.  So, comparisons will be good from last quarter for a lot of companies.  But, we’ll really have to dig deep into the books to see how business is really doing for a lot of these companies.  Given the earnings though, that may be the excuse we need to rally a bit.  But, I think that will be the place to sell positions if you haven’t already done so.  Breaking 8000 on the Dow looks to be in the cards. 

The more we fall and the more scared investors get and the more people doubt the economic recovery, the bigger the snapback rally will be late summer into the fall.  Because I’m positioned for a pullback, I welcome it and you should too.  Markets don’t go straight up and if you play your cards right, you can take advantage of these big swings.  Tons of investors are flat on the year because they rode it down in January and February and rode it back up in March & April.  For those of us that were light on stocks in early 2009 and heavier in the 2nd quarter, we’re still enjoying double digit gains. 

Many people keep asking me to give them levels on the indices.  How far can we fall from here?  As I mentioned on my radio show yesterday, I simply lighten up on stocks when the risks rise and I increase my allocation to stocks when the risks fall.  Right now, the demand for stocks has fallen while supply has picked up and the risks are rising to hold stocks.  That certainly doesn’t mean we can’t rally from here.  It simply means I won’t participate until the risks go down.  It’s that simple.


Indonesia’s President, Susilo Bambang Yudhoyono, was re-elected yesterday for a 2nd 5-year term andI’m thrilled he was.  This is a former army general who has turned Indonesia around.  It’s a fast growing economy with a lot of natural resources like palm oil, coal, & nickel.  They have a population very similar in size to the United States but about 10% of them live off of $.70 per day.  So, there are huge opportunities to get these people living a better life similar to what China is going through right now.  Yudhoyono’s VP is a Wharton graduate who is an economist.  This is very different from our politicians who are lifetime politicians.  In addition, Indonesia has seen its fastest growth in over a decade by fighting corruption, reducing regulatory hurdles, & cutting debt.  Sounds like how we’re doing things here doesn’t it?  Oh wait, it’s the complete opposite.  If these trends continue, money will continue to shift away from countries where it’s hard to do business and end up where it’s easy to do business.  Indonesia is one of those countries that is moving in the right direction and I think more and more capital will move there.  I remain bullish. 

Biz Radio Power Trading Strategy Session & Workshop

Just a reminder that I’ll be in San Antonio tonight along with Vince Rowe at the Westin on the Riverwalk going over a lot of the indicators I look at to navigate the markets.  In addition, we’re going to be giving out some various investments we think can double over the next year.  I hope you can make it.  It’s free but you must register at www.bizradio.com

This post published at www.karleggerss.com

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2 Responses to “A Weak Bounce”

  1. 1 Larry B. July 10, 2009 at 8:34 pm

    If we were unable to join you for your San Antonio presentation. Can we get a copy or overview of your presentation? Thanks,

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