Submitted by jeffm on May 19, 2010 - 7:39am
Wow. What a turbulent ride. With all three of the major US markets near their 200 day SMA, you've got to be a bit nervous. It seems that the majority of investors are remembering September of 2008 and the near financial melt down brought about by numerous factors. Trouble is, this situation is entirely different.
Is the US economy failing? No, quite the contrar. All indications are that we are getting stronger. Are US corporations missing earnings estimates, laying off workers and guiding lower as they look forward? No, no and no. So what is going on?
My suspicion is that the memories of the September '08 debacle are still very fresh in everyones mind. Now I know that what I'm about to say is a bit of a stretch, but think about it... When Argentina basically went bust, did it affect our ability to generate profits? No. Did the US markets react? Not really... Is Greece really that large in terms of it's total debt? No. Are we concerned that this is simply the tip of the ice berg? Without a doubt, yes. So, what are we to do in this sort of market? Stay hedged. Whether that means carrying long puts against stock positions and/or short calls, or, if you are not well trained in the use of options, then going to cash or at least buying high quality stocks.
Despite the concerns over a slowdown in Europe's economy, Hewlitt Packard (HPQ) reported better than expected earnings yesterday and showed SIGNIFICANT GROWTH in the European economy! AND they raised their guidance going forward.
John Deere (DE) excellent earnings, WalMart (WMT) 10% increase in revenue, Target (TGT) exceeding expectations. Just take a look at the actual earnings results of the S&P 500. Check out the data (updated 2 days ago) from the S&P...
I would be very careful about how I trade this market. Europe may prove to be the big problem that many are suggesting. If not, look for a significant move back upward based on the fundamentals of both US Corporations and the overall US economy.
For now, stay hedged and stay alert (the world needs more lerts!)
All the best,
Director of Education
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