Thursday, January 24, 2008

Looking Ahead

The markets are taking a breather this morning after yesterday's wild session. In any move upward or downward, there are always a couple of one or two day reversals before continuing. The question now is are we nearing a bottom, or is this just stop on the way down further. To me, earnings will be a major catalyst for the next couple of weeks of trading. The bears have been anticipating weaker earnings growth, and so far numbers have come in well. Companies have been giving cautious outlooks for upcoming quarters, but given the recent volatility thats no surprise. The Fed will probably cut rates again next week, and that could help as well.

In the meantime, we get tidbits of data about home prices and unemployment. I think these will continue to be mixed, and show the economy is still fairly strong.

As far as the government stimulus goes, I think its only positive if it helps consumer confidence. Aside from that, its a bad idea to let politicians get involved in things like this. Most of them have little experience and aren't in touch with what drives the economy. Markets should be allow to re-price themselves based on risks as they change. The Fed should be responsible for providing stability in the markets, and so far, I think they've done okay. They can't just rush to judgment and fly in to save the market, as some preach for them to do.

Financial stocks will be the first to make a charge when things reverse. If we see increased weakness, I'll be looking to pick off a stock or two in that sector. Until then, be careful on buying just yet.

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