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Inquiring Minds Want to Know: “Is That All There Is?” February 26, 2011

Posted by Tom in Thoughts.
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The “buzz” on the financial TV talk circuit is: “Is That All There Is?”, referring to the latest blimp down in the market.  The last two market drops have been primarily news driven; first Egypt, now Libya.

These (of course) drive oil upward almost immediately.  Why?  Because of what might or could happen.  There are many gloomy scenarios out there.  Gas at $5 a gallon, and the list goes on. 

But what are the markets saying?  Right now, I’d say “Wait”.  We saw heavy selling on Tuesday and Wednesday, but the selling dried up on Friday.  Now, don’t get me wrong.  Just because the markets generally closed higher on Friday doesn’t mean that buying came back in.  For that to happen, I’d like to see a Close solidly above Friday’s High of 1320 (S&P 500 index), with high volume (150% higher than Friday’s please).

If one gets past the news headlines, things don’t look too bad.  4th Qtr. earning did very well and unemployment is slowly improving.  The P/E ratio (price/earnings) for the S&P is historically cheap.  While this rally is “long in the tooth”, and due for a modest pause, the big picture is fairly positive.  But maybe that’s what the concern is about, the oil factor.  Talk of a double dip, et al.

I prefer to pare back a little and wait, at least a few days to see what the market tells us.  Right now it’s not so obvious.  Have a good week.

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