My Market Outlook
Stockscores.com Perspectives for the week ending February 3, 2012
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In this week's issue:
It is game on in the market, after a rough second half of 2011 the market is now showing optimism again. It makes sense as the problems in the European Union are being solved, the economy is improving and US politicians are trying to please constituents (that is a polite way of saying buying votes).
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Now, let's discuss the markets.
I constantly encounter investors who are pessimistic about the market right now. They cite an economy that continues to struggle with slow growth and high unemployment. The housing market remains soft in most parts of North America and the banking industry seems to still be struggling with the overhead of loans gone bad.
Beyond North America, debt problems in Europe and a slowing of that economy in to recession are a drag on confidence. Greece, Portugal, Spain and Italy all face a seemingly unmanageable amount of debt and high unemployment and headlines constantly discuss the threat of sovereign default.
Growth in the developing markets of Brazil, China, India and China has slowed and governments have had to make an effort to control inflation with restrictive monetary policy.
So, with all of this negativity, how can markets possibly be doing well?
The thing about markets is that they really don't care about what has happened in the past. Markets look forward and price what investors expect to happen in the future. All of the negative factors that I listed above are old news. The market priced in those things long ago.
Now the market is pricing in what it expects for the future. An improving economy, settlement of debt issues in Europe, lower unemployment and the potential for further stimulus from governments are what have investors growing optimistic.
The markets are demonstrating an expectation that the US Dollar goes lower in the months ahead. Perhaps this is because Europe is stabilizing or perhaps the expectation is that there will be an increase in money printed in the US. The cause is not that important, the result is that investors are looking for opportunities in commodity based stocks right now because those benefit from a lower US Dollar.
Investors are also showing an interest in playing stocks instead of just playing the stock market, as they have done since May of 2011. That means individual stocks are able to make market beating moves. If a company has some excitement in their story, there are speculators willing to take the risk.
This market is getting back to normal as it moves away from the highly correlated conditions that we have endured over the last half year. I am finding good success playing stocks that suddenly show abnormal trading activity, a sign that the investors closest to the company are trading on new information that is not widely known. Right now, most of the moving stocks are coming from the Commodity and Technology areas, focus on those when looking for trading opportunities.
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The buyers are in control of the market and speculative money is returning to stocks again. This week, I ran the Stockscores Simple strategy on the Stockscores Market Scan with particular attention on the lower priced stocks, which have been moving well lately. This scan seeks stocks breaking from good chart patterns; I like to see price moves out of low volatility, optimistic chart patterns. Here are three stocks that I found this week:Back To Top
1. V.SLG
V.SLG was featured in my daily newsletter on Friday and I bought some after featuring it. The stock broke out from an ascending triangle pattern on Friday with abnormal volume, a sign that the buyers are excited about something. Support at $1.82.
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2. AVII
AVII traded pretty good volume on Friday as it broke through short term resistance from a rising bottom. This chart pattern is one I call a Bottom Fishing set up. Support at $0.85.
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3. BWEN
BWEN traded more volume than normal on Friday as it inched out of a pennant price pattern. In doing so, it broke a long term downward trend line and it appears the buyers are finding an interest in the stock again. Support at $0.67.
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References
Get the Stockscore on any of over 20,000 North American stocks.
Background on the theories used by Stockscores.
Strategies that can help you find new opportunities.
Scan the market using extensive filter criteria.
Build a portfolio of stocks and view a slide show of their charts.
See which sectors are leading the market, and their components.
Disclaimer
This is not an investment advisory, and should not be used to make
investment decisions. Information in Stockscores Perspectives is often
opinionated and should be considered for information purposes only. No
stock exchange anywhere has approved or disapproved of the information
contained herein. There is no express or implied solicitation to buy or
sell securities. The writers and editors of Perspectives may have positions
in the stocks discussed above and may trade in the stocks mentioned. Don't
consider buying or selling any stock without conducting your own due diligence.
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