After 7 straight days in the red, stocks bounced modestly higher on Wednesday. Yes, it could be a lasting bounce. But unfortunately I sense this was nothing more than a relief rally. The main impetus behind the move was that some investors noted the market was "technically oversold". Then toss in renewed hopes for the Fed to step in with QE3 and stocks nudged higher.
The sad fact is that the Fed has already used up all the really good ammo in the first couple rounds of quantitative easing. So at this stage, QE3 may be like coming to a gun fight with a butter knife (a plastic one at that). So if investors are hanging their hopes on QE3, then they might as well ask Santa and the Tooth Fairy for help too.
I stand behind my call yesterday to get more defensive. In fact, this near term bearish view was only bolstered by the unimpressive showings from the ADP Employment and ISM Services reports. ADP shows jobs growth, but not at a pace that will lower the unemployment rate any time soon. Whereas the ISM Service Index is moving ever closer to showing a contraction for the largest parts of our economy.
For full disclosure, these events emboldened me to move my portfolio to 50% short the market. Meaning that I will make money in the near future as the market goes down. I think the odds are strongly in favor of that happening over the next 1-2 months. From there I am hopeful that the economic data points to Muddle Through Growth and stocks start to progress higher. If that is not the case, and the odds of a recession increase, then I will become even more aggressively short the market.
Remember you can make money no matter what the market does. Stay engaged with us and we’ll show you the path to profitability.
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Today's Top Stories: Thursday- August 04, 2011
ZACKS RANK BUY STOCKS
- Aggressive Growth - Newpark Resources (NR) reported revenues of $231 million, up 27%. That led to net income of $19.3 million, up nicely from $10.8 million a year ago. EPS came in at $0.19, which was 2 cents better than expected.
Growth & Income - Nu Skin Enterprises, Inc. (NUS) revenue rose 9% year-over-year to $424.4 million, well ahead of the Zacks Consensus Estimate of $407.0 million. Sales were up 12% in North Asia and 29% in South Asia/Pacific. Read More...
Momentum - Sturm, Ruger & Co. (RGR) earnings also came in strong at 56 cents, 33% ahead of the Zacks Consensus Estimate, where the company has an average earnings surprise of 17% over the last four quarters. Read More...
Value - Rockwood Holdings, Inc. (ROC) surprised for the 8th consecutive time. Not only has it beaten the consensus, it has beaten big. Earnings per share were $1.19 compared to the consensus of just 97 cents. Read More...
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