More Volatility Ahead

chart courtesy of www.stockcharts.com

The past few weeks have proved quite a roller coaster ride for traders and investors alike. We have seen several hundred point swings intraday. This volatility has offered numerous day trading opportunities. Markets do not like uncertainty and the recent Fed decision not to raise interest rates has not helped. Pundits continue to speculate what the Fed's next move will be. All of this is just speculation of course. What is certain is that the Fed would have worsened the problem if they raised rates. A so-called "hard landing" would have been virtually guaranteed. The global economies ARE connected and we simply cannot choose to ignore them when they continue to weaken.

If the recent global data continues unchanged we can expect to see more selling pressure. The Chinese data is awful. They are no longer able to present a rosy picture of their own economy. The smoke and mirrors are broken. Market forces are taking effect. This is as it should be.

The Dow will most certainly test its 15380 level over the next few weeks. All of the technical charts are pointing to a move lower as the market backs and fills. If the retest holds we will have an intermediate bottom similar to 2011. While weakness abounds it does not mean the end of the world! In fact we will continue to have great buying opportunities in energy, commodities, and manufacturing. Many of the old line manufacturing companies still have strong cash flow and they are paying 2-3% dividends.

Note: The above is for informational purposes only. Any decision to buy, sell, or hold a specific investment for a portfolio should be reviewed by your investment adviser.

Buying Opportunity. The Case for Free Markets.

chart courtesy of www.stockcharts.com

The recent market plunge has created interesting buying opportunities. The US economy remains one of the strongest in the world. Even with the strong dollar US comparnies remain attractive. Three rounds of quantitative easing have resulted in a modest recovery. The case for free markets remains intact.

Recent market volatility was caused by 2 major factors:

1. Uncertainty at the Federal Reserve. While the REST OF THE WORLD is talking about easing monetary policy to stimulate growth our own Fed will not rule out a rate increase at its September meeting. As a poor poker player not wanting to reveal a hand so is the Fed's rhetoric about having to raise rates. They missed their chance. The world economic slowdown has done the work of a rate increase for them. Now they are stuck unless they want to plunge the US economy into recession. Make no mistake a rate increase would have negative resounding effects throughout our economy. And it would create an even stronger dollar as world investors seek to take advantage of the higher US rates.

2. Uncertainty in the Chinese markets. The recent selloff in the East has somehow been blamed on the reporting of a few journalists and market speculators. This propaganda has only caused the markets to become more unstable. Everybody knows the Chinese economy was in trouble for some time. Their real estate bubble was bigger than our own in the United States. And the average Chinese citizen was actively encouraged to invest in the financial markets without understanding the risks.


Chinese financial journalist Wang Xiaolu is forced to "apologize" on national TV for his role in reporting the financial climate in China. Apparently his crime was not clearing his factual reporting with the Chinese government before making it public. Somehow this was deemed to have caused the 25% pullback in Chinese markets.

As always the market does not like uncertainty. We can expect a retest of last weeks lows as the market backs and fills itself from the imbalances caused by the volatile trading sessions. The US companies remain one of the best places to invest. Many companies are sporting a handsome dividend and they are in a better financial position than most banks. These value stocks in several sectors offer a great buying opportunity after being beaten down. Sometimes the "experts" need to leave the markets alone. Their interference will only make things worse.

Note: The above is for informational purposes only. Any decision to buy, hold, or sell a specific investment for your portfolio should be reviewed by your financial advisor.