Fear was on the rampage Tuesday leading to a scary intra-day drop to Dow 9774 before rallying into the close at 10,044...about where we started the day. I'd love to tell you with 100% certainty what is going to happen in the future. Yet we all know that economics is not an exact science. And the stock market is even less exact. So yes, it's true that I have advocated the case for economic recovery and a rebounding market, but that doesn't mean I haven't given the bearish case a thorough examination. Unfortunately, I have to admit that it's "possible" that the run up from 6500 to 11,300 was a bear market rally and tough times will resume.
There seems to be momentum on the fear side. The saber rattling of the North Koreans and pictures of oil covered birds in the Gulf certainly is not helping matters. Simply put, there is a lot more wealth destruction that "could" take place before the bull side prevails. It is also "possible" that the bear side of argument proves correct in the long run leading to even greater losses. This is my way of saying that I don't want be so stubborn about my current bullish stance as its financially prudent to consider that the bears might have a point. So if Tuesday marks the bottom and the rally resumes from here, then we can applaud our good fortune. However, if the market closes under 10,000 at some point in the near future, then buy some short ETFs (Ex. SDS, QID, TNA) to profit on the way down. That doesn't mean that you have to sell all of your current stocks to do so. Just think of it as an insurance policy that limits potential losses until we have greater clarity on whether the bull or bear case has more credence.
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Today's Top Stories: Wednesday- May 26, 2010
ZACKS RANK BUY STOCKS
- Aggressive Growth - Intevac Inc. (IVAC) analysts were expecting a report of a 4 cent per share loss on May 3. The company ended up profiting 6 cents, continuing the more than 5-year streak of earnings surprises. Read More...
Growth & Income - Regal Beloit (RBC) reported net sales of $507.3 million, up 14.4% from the year-ago quarter. The company earned $0.98 per share, topping the Zacks Consensus Estimate by 16 cents, or 19.5%. Read More...
Momentum - Grand Canyon Education, Inc. (LOPE) first-quarter earnings came in strong at 25 cents, 25% ahead of the Zacks Consensus Estimate. Grand Canyon has been running ahead of the curve for the last year, with an average earnings surprise of 23%. Read More...
Value - Park Electrochemical Corporation (PKE) reported its fiscal fourth quarter results with a sales rise of 42%. Earnings per share were 40 cents compared to 14 cents in the year ago period. The Zacks Consensus called for 26 cents. Read More...
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ZACKS MUTUAL FUND RANK
- Top 5 Small Cap Funds
Add small caps to your portfolio with Turner Small Cap Growth (TSCEX), JPMorgan Small Cap Equity A (VSEAX), Sit Small Cap Growth (SSMGX), Lord Abbett Small-Cap Value A (LRSCX) and AIM Small Cap Equity A (SMEAX). Read More...
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