Hi Everyone
Earnings season is around the corner, and after an unhelpful rangebound two month period since the last earnings season I expect to see a long-awaited market move by the end of July. The last couple of months have see the market stall somewhat, with a greater number of whipsaws and those nasty long-tailed bars which we really don’t like.
As you know, we never predict – remember Warren Buffett’s saying “Forecasting tells you much about the forecaster and nothing about the future”.
However, I cannot see how the markets can remain at these levels for much longer. And this is for a number of reasons …
Don’t be fooled by another false breakout. When you see these happening with several stocks, it’s often a signal of a market reversal.
So, where are the markets headed? Who knows in the very short term – a couple of decent earnings announcements may cause some choppiness for a bit, but even if they do, I don’t expect it to last.
Now, I’m not the perennial bear, but if you think the banks and credit markets are out of the woods you’d be mistaken by a long shot. I speak with these folks and anyone who’s doing business out there will also tell you that the banks are not releasing credit as freely as the governments would like them to. I suspect there’s also a layer or two of bad news still to come from some of the banks. Time will tell.
<<< UPDATE >>>
Now, since this draft was written before yesterday’s open the markets have been shaken up by the employment report, causing a breakdown in prices.
Here’s a chart of the S&P, which is very similar to the Dow.
Now would be a good time for a consolidation and a breakdown past support of around 875.
Similar case with the Dow …
So, in conclusion, my focus is on bear flags, as it has been for some weeks now. The markets could still be a bit choppy, so remember to take that first profit early – you don’t have to wait to the 1: 1/2 area. You can take your first profit after a $1 move if you like and ride the rest. This at least enables you to ringfence a profit and protect your position.
That’s it for now. I’ll follow this up soon.
All the best
Guy
