WILL YOU BE LATE OR EARLY TO THE RALLY PARTY?
Here is a very interesting article that perfectly explains what is going on. It makes a good case both for a rally and for some additional downside. The bottom line is this: we are near or slighly below fair market value now on Naz and below on the DOW, which means that some stocks are still overvalued (i.e. RIMM) and others are undervalued (i.e. GLW). Everything could still get cheaper but when we look back a year from now, I think we will see that we traded in the range of 1700 - 2300 until June and then traded up slowly up from there.
From "The Street" article:
"If Alan Greenspan makes positive comments, or the tax-cut proposal is passed or just one bellwether company announces it can see the end of the tunnel -- that it's starting to see an upturn in orders -- "you'll see people closing their eyes and buying, Ginzburg said. "Nobody wants to be the last one to the party."
Pin the Tail on the Market
But being last to the party -- or at least late -- is precisely the recommendation and strategy of Hugh Johnson, chief investment officer at First Albany, which has about $630 million under management.
"Many conditions that accompany the end of bear markets are in place," Johnson said, citing Fed easing and the overall liquidity picture, a steepening yield curve, small-cap outperformance and narrowing credit spreads. "The only thing missing is a bull market."
Johnson was being facetious (I think), but his point was that he "wouldn't be the least bit surprised if [Thursday] was bottom, or if we have to wait until June. There's no way to tell if that's it -- there is no road sign."
And this....
"Sam Ginzburg, senior managing director of equity trading at Gruntal, described as "irrational selling" in the wake of the Federal Reserve's decision Tuesday to lower interest rates by 50 basis points, rather than the hoped-for 75 or even 100.
But despite the midweek signs of capitulation (albeit controversial), Ginzburg isn't convinced the worst is over because the advance late Thursday and Friday was without a significant catalyst.
"I do think we can have two or three good days, but I feel it's an impossibility we're out of the woods," he said. "I still think we're in the sixth or seventh inning of a nine-inning ballgame" of selling.
That said, the trader also noted "good institutional buying" Friday and the fact "people want to buy stocks" and that the level of cash on the sidelines is "unbelievable."
whole story at: thestreet.com |
