Commentary for November 2nd, 2009

Sometimes it seems like too much of a good thing is too much to handle.  Investors, longing for good corporate and economic news, but meanwhile bidding up the stock market nearly sixty percent, got it over the past few weeks in the form of solid earnings reports as well as Q3-GDP.  However, that was too much to handle and investors chose to sell sending stocks down, pushing averages lower for their first month since this past February.  AT THIS TIME, we believe that the end of the fiscal year for mutual funds (pushing market generals and then their lieutenants downward), the close of the month and general skepticism regarding the strength of the recovery turned the sell-off into a rout.  Again, AT THIS TIME, and as we have noted TIME AND TIME AGAIN, the Dow seems attracted to 10,000 on either side of this number like a moth to a lantern.  We continue to believe this, but will add the caveat that perhaps Dow 10,000 acted as a ceiling, at least for the near-term and think this may most likely continue for awhile longer, eventually breaking out to the upside.  Our position over the past six months has been that the move off the lows to Dow 10,000 has been a recovery of the panic low and once digested, stocks can move higher.  However, unlike the last move which included almost all securities, this one will include only those that can report earnings and revenue growth.  As noted above, we remain steadfast in our belief that after a more than fifty percent run-up in all of the major averages with not even one correction of more than ten percent, a correction is rational, necessary and overdue.  However, we believe it will be no more than ten to fifteen percent and that after a period of consolidation, should it come, this rally still has legs and will use pullbacks near ten percent to establish or add to equity positions.  With this in mind, we continue to encourage equity investors to add to positions on fear and weakness rather than to sell on strength.  We also encourage income oriented investors to look at corporate, municipal and agency and foreign government issues.

Finally, congratulations to our newest employee, Samantha Fagan, who celebrated her 22nd birthday yesterday, November 1st.  Oh, to be young!

This entry was posted on Monday, November 2nd, 2009 at 8:15 am and is filed under Commentary. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.