Market to rise, but how far?
by Peter Switzer
Standby for a great day on the stock market today after Wall Street reacted positively to surprisingly good earnings for JPMorgan.
It’s ironic but Friday the 13th turned out to be lucky, but can it last?
My gut feeling says no because there are too many negative issues to deal with in the short term, but let’s just enjoy a good day or two when they come our way.
By the way, our shares and their prices are in the hands of traders who take the local stock market between 4000 and 4300, and until Europe stops spooking investors, the traders will buy at low points and sell at higher levels. The long-term investor just has to cop it, not sweet, more like sour!
That said, I think the worst of this will end later this year or maybe early next year and that’s when we will get a rally that we can trust. I don’t trust this one.
Wall Street gains
Out of Wall Street on Friday the Dow was up a whopping 203.82 points or 1.62 per cent to 12,777.09, while the S&P 500 went up 22.02 points or 1.65 per cent to 1356.78. There are quite a few US analysts who think 1450 on this broad index is on the cards for year’s end, but I reckon it could be higher.
Anyone wanting a reference on how worried US investors are, the VIX or fear index is now under 17, which shows they’re not worried much at all.
The big news was JPMorgan beating market expectations, despite its US$4.4 billion loss earlier this year when a dastardly dumb trade out of London went terribly wrong. The bank still made nearly US$5 billion! Bruno Iksil — the “London Whale”, who made the goof up — unsurprisingly has now left the UK branch of the bank.
Don’t trust the rally
So, why don’t I trust this rally? Firstly, it’s the reaction of an oversold market to a good profit report from JPMorgan and maybe US company reporting could come in on the better than expected side. I have been backing this for a couple of years, and have been right, but this quarter I’m not sure.
The China slowdown to 7.6 per cent and the EU problems have hit global growth and this should hurt companies in the USA exposed to rest of the world. Also the US dollar is up about 11 per cent and that makes US goods less sellable overseas.
I’m not in the ‘US will go into recession’ camp because the Federal Reserve would move with QE3 if that were likely.
Most of all, I’m still worried about Europe but I do think the Continent’s leaders are getting closer to something that might impress the markets later in the year.
In the US this week there’s a pile of important economic data but more crucially there will be reporting from companies such as Citigroup, Coca-Cola, Goldman Sachs, Intel, Bank of America, Morgan Stanley, Google, Microsoft and GE.
This will be a HUGE week and if economic data and company profit reports come in better than expected, then Wall Street will surge and we will play follow the leader. I hope I’m wrong but this could be a tall order.
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Published on: Monday, July 16, 2012
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