Buy or hide?
by Peter Switzer
With the local stock market down almost 10 per cent and the S&P 500 off nearly seven per cent since April, the question is, is it time to hop into this beaten down market or should we wait a little longer?
Note, I don’t subscribe to the Armageddon option and I see this as a correction, which will turn around in the second half of this year.
Edward Krudy of Reuters in New York says watch the S&P 500's 200-day moving average to help make up your 'buy now or later' strategy.
The lowest recent point was Thursday and that coincided with a kiss with the 200-moving day average.
Now the new average level is at 1259 and the question is, can it hold?
The big worry is the Nasdaq, which has broken its 200-day average and it has been a leader for the market.
The Greece bailout or default story will be the critical story for the week — one false move and the fat Greek economy gets it and we all could be sucked into another post-Lehman Brother credit crunch.
That’s why the EU and the IMF have to come up with a solution.
Bob Doll, the investment boss at Blackrock, the biggest fund manager in the world and a guy I interviewed in New York late last year, thinks the S&P 500 will rally to 1350 by the end of this calendar year.
"We're going to find Band-Aids and we're going to muddle through these credit problems," Doll told Reuters. "The consequences of not following that route could be pretty dire, and I think the interested vested parties are going to step up."
One interesting positive sign is the put/call ratio at the Chicago Board Options Exchange is now at the highest level since January 2009, which of course ran ahead of the big bounce of March of that year.
It’s a big spike and history shows that the S&P 500 closely tracks this ratio.
One thing I will say, with a lot of worries around right now, this keeps me cautiously positive.
Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.
Published on: Monday, June 20, 2011
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