Wednesday, July 28, 2010
Expect a Market Sell-Off
After four days of having the broader market indexes (DJIA, S&P 500, NASDAQ) up nearly 4.5%, I expect there to be some profit taking over the next couple of days. With lackluster earnings reports from Boeing (BA), Aetna (AET), and others, as well as a durable goods number falling short of estimates as demand remains weak, it could be the catalysts traders were looking for to take some profits. And I personally do not think this, but many traders still feel that a double dip recession is very likely. The one metric that has me worried is the Treasury market. Yesterday, a two year Treasury auction supposedly went better than expected, but still its the lowest yield ever on a two year Treasury- with a 0.665% return. This auction shows, that even though the stock market has had a nice rally the past few days and Q2 earnings have been much better than expected, investors are still very cautious. Like I said, I do not think we will have a double dip recession, but I do feel a pull back in the stock market will happen. So, I would not commit new capital into this market right now- wait for the market to sell-off. I think you could see 2.5%-3.5% shaved off this market over the next 3-5 trading days. Also, this sell-off may be delayed if we do have a collection of good earnings before the bell someday this week.