Thursday, May 1, 2008

Tough Market to Navigate

I'm finding this market very difficult to navigate right now. All the weak dollar plays are getting trounced (agriculture, oil, etc). But at the same time, shorting the market isn't working either, because a lot of stocks I don't like are rising, and keeping the broad market higher. Mostly financial names and some tech stocks. You have Visa and Mastercard getting very overextended. And who really wants to buy Citigroup right now? But someone is.

The Dow gets manipulated by one or two stocks quite often, because its price weighted, not cap weighted. So a stock like IBM, which trades over 100, moves the index much more than a stock like Intel, which trades just over 20.

Our patience is really getting tested right now. But you have to stick with the companies that are performing well right now. It's important not to get suckered in to buying stocks that are losing money but rising simply because they are oversold.

2 comments:

Bill G. said...

I agree that it's a tough market to navigate, but don't you think that now is a good time to buy the stocks that actually have earnings, while the prices are down? It seems to me there are a lot of great U.S. companies on sale right now and the instability in the market could be providing us with a great buying opportunity.

Michael said...

Bill,

There are some good opportunities. It is just that right now, everything that has worked, isn't working. It is new sectors leading the way (financials, homebuiders, tech) as opposed to energy and agriculture. And that is okay, but as investors we need to be careful not to go too far in, in case its a false move. I think it is a good time to buy individual stocks, not necessarily the market as a whole.