Saturday, July 3, 2010

Very Tough Week for the Markets

This week was a horrible week to be long stocks. The major average had huge declines, commodity prices dropped, and treasury yields fell considerably. Yet, I still think there is still some more downside to come:

1) The 10 year treasury is still below 3%- a lot of investors, including myself, see the 10 year as a "fear factor" when it comes to the stock market.

2) Late day market sell offs- if the market wants investor confidence to rise, we need to see buying into the close, not selling.

3) Gold price rising- gold is a "safe haven" when times get tough in the market. Its generally thought that gold will never go to zero, so its a safe plae to put your money.

4) Bad economic data- for awhile, the economic data had improved dramatically, but I believe that the European scare slowed people's spending and companies' hiring. If the Euro can continue to rise against the US dollar, then this could be a sign that Europe's economy is improving.

5) No catalyst to buy- looking at the four reasons above, why would anyone want to stick their neck out and buy into this market.

So, there is no reason to rush into this market. With the 10 year yield under 3%, I feel that investors will continue to look toward good dividend paying stocks (look at Tuesday's post)- these companies have outperformed the market this past week. Key indicators to watch for a potential turnaround in the market: the 10 year, late day buying, continued rising Eruo vs US dollar.

This weeks numbers:
DJIA: -457.33 or -4.51%
S&P 500: -54.18 or -5.03%
NASDAQ: -131.69 or -5.92%

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