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Time to go long stocks again?

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by Peter Switzer

Now that Greece looks sorted, at least for a time, and the Yanks are buying shares again with the Dow up a whopping 5.43 per cent for the week, is it time to go long stocks again?

Last week’s reaction was big with the S&P 500 up 5.61 per cent for the week and it’s now up 6.52 per cent for the year to date, which shows how big last week was.

The fear index or VIX is down to 15.98, which is low and shows that fear has subsided. It was around 22 a week ago.

One interesting point is that volume is thin, which means we could still be in tricky waters. Some experts see profit-taking from here and then it’s a matter of waiting for the US profit season to see how America’s big companies are doing.

Last Friday, the Yanks got a weaker consumer sentiment report from the Thomson Reuters/University of Michigan survey, but the ISM’s manufacturing report was the best in four months. This adds weight to my argument that the US slowdown is temporary and related to Japan’s supply problems, bad weather and the spike in oil prices.

But there’s still some way to go before I’m certain I’m right as construction spending fell again – that’s six months on a trot – and CNBC says it’s the lowest reading in more than a decade!

In an interesting twist, the US Treasury Secretary, Timothy Geithner is thinking about retiring and that will make a few of his critics happy. His decision either way is expected in August after the debt ceiling matter is agreed to in Congress.

I think there will be some profit-taking from here and that will then set the Yanks up for a really good look at the company profit reporting. Over that time, if the run of economic data picks up as I suspect, Wall Street will head up and that will help our stock market as well.

Published on: Monday, July 04, 2011

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