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Good or bad times for stocks ahead?

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by Peter Switzer

At a time when the market isn’t heading up and experts are using terms like “consolidation” and “profit-taking”, it’s timely to see if the omens are still pointing to better or worse times ahead for stocks.

Well-known bear economist Ian Shepherdson, who is the chief US economist at High Frequency Economics, who foresaw the housing crisis and tipped a recession, has told CNBC he’s now in the recovery in 2011 camp.

He says loans have to star getting through to small business to cement the recovery and that’s something relevant for our own local economy.

The contraction of credit is slowing in the US and QE2 should help the supply of credit.

Shepherdson thinks the pluses are starting to beat the negatives.

“I do think that the seeds have been sown now,” he said. “And looking ahead six to nine months, I think about the middle of next year things will look a lot better."

The golden cross

Another bullish sign is a golden cross for commodities. This cross happens when the 50-day moving average cuts above the 200-day moving average.

CNBC dated the cross and the rise in price and makes for interesting reading:

Cotton, 9 August, 77 per cent.
Corn, 21 July, 55 per cent.
Silver, 2 September, 42 per cent.
Copper, 17 August, 18.5 per cent.
Gold, 18 August, 13.5 per cent.
Heating oil, 24 September, 11.6 per cent.
Crude oil, 1 August, six per cent.

Data overnight

Meantime on the economy, initial claims for the jobless dropped by 24,000 to 435,000, which was a surprise and the four-week moving average of claims fell to 446,500 and this the lowest since September 2008.

Remember if the US sees jobs growth, the stock market will take off — that’s a near certainty.

Finally applications for mortgage loans including refinancing rose in the first week of November and when the Yanks get jobs and houses right, they will be off to the races.

However, I believe this will be a 2011 thing. Remember a stock market will get in six months before the real world economy shows that it’s getting stronger or weaker and that’s an investor’s challenge!

For advice you can trust, contact Switzer Financial Services.

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.

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Published on: Thursday, November 11, 2010