I’m looking at the major business newspapers this morning and I see one big story missing from page one of these newspapers, “Dow Jones up 250 points yesterday, single-day gain of 2.3%!”
Yesterday’s big rise in the Dow Jones Industrial Average is very significant for the stock market.
As a leading indicator, the market predicted the turnaround in corporate profits months ago. That’s why stocks are up about 70% from the spring of 2009.
While not moving in a straight line, the Dow Jones was able to reach a two-year high of 11,451 in early November. In all markets that rise for an extended period of time, profit taking is as natural as the snow the northern states will get this winter. Profit taking took the Dow Jones below 11,000 early this week and then, presto, just like a rubber band, the market rebounds with a huge 250-point rally.
Why do I see yesterday’s one-day rally as significant? Because it signals that the bear market rally that started in March of 2009 still has upside potential. Investors, sitting with billions of dollars on the sidelines, only really have two things to worry about: The real estate market and higher interest rates in the U.S. Otherwise, it’s a green light for corporate profits.
Look at it this way: An investor who bought the Dow Jones on Tuesday made more money on Wednesday than he or she would have by holding U.S. T-bills all year!
Just this morning…
Target Corp. (NYSE/TGT), the major American retailer, said its same-store sales rose 5.5% in November from November 2009, beating analyst expectations.
Saks Inc. (NYSE/SKS), the high-end retailer, said cash registers at its same-store locations rang up 5.3% more in sales this November than in November of last year.
Gap Inc. (NYSE/GPS), a major American clothing retailer, said this morning its November same-store sales were up four percent from last year, also beating analyst expectations.
(I told my readers months ago to look at the retail stocks because they would surprise this holiday season on the upside…and they have. I still think the major retail stocks have more room on the upside for price appreciation.)
Corporations are pumping profits and investors have few choices when it comes to parking their cash. Stocks still look attractive at these prices levels.
Back to the major headline missing in today’s newspapers…
Very few people writing about the financial news are seasoned financial analysts. What makes a great financial analyst: someone who has traded the markets for at least 20 years; someone who has a major economics or similar educational degree; a person who has studied technical analysis and has taken difficult courses on stock market analysis; and, most importantly, someone who has put their own money on the line and won.
But think about it for a minute. If a reporter possessed everything I just listed above, why would they be a reporter? Exactly; they wouldn’t.
Read more here:
http://www.profitconfidential.com/stock-market-advice/yesterday%E2%80%99s-250-point-rally-very-significant-for-stocks/
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