Wednesday, February 28, 2007

So, what's next for Stocks

Let me start with my day in the office. It was a mixed bag. I had one trader tell me that this was no big deal. "The Dow hasn't had a correction in month's". Another said to me "This is a correction, pretty sad one at that". Then the guy's on CNBC seem to be looking for the next move down. This is a sentiment I heard over and over again from many traders on the street. But what if it doesn't come? I certainly was not a fan of today's bounce. Although relatively broad based (75% of S&P and 17-30 Dow stocks were up today)it did not have substantial staying power and only a 12% retracement. I think that if you are bullish you should be legging into longs. Buy in regular intervals, an equal amount each time. This is called Dollar Cost Averaging. If you are a bear, sell your holdings and move to Treasuries. But remember that stocks tend to rebound (remember 1987 and 2001)and if you get out totally you miss the growth (if it occurs) over the longer term.

For Foreign Exchange I am equally confused. One friend of mine said that the Euro had some catching up to do. Meaning a sell off in the Euro. This was certainly against my thinking. The U.S. economy is slowing (see previous post with today's number's)and Stocks and Emerging Markets are under some pressure. This is not a market that I want to be long Dollars. Yes, i know the old saying about running to dollars in times of crisis, but it would seem that the dollar should suffer in this market (it has been under pressure for the past few years). For now I have been trading dollars from the short side but with a very short lease. Not my style at all. More number's tomorrow. Most analysts expect further weakness, which in turn should put some pressure on stocks.



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