Well, well, the euro rallied today. Is that
because China came out and endorsed the European Union’s efforts to contain
its debt problems? Or should we assume that traders are simply lightening
up on their positions as 2010 winds down.
I’ll take option #2. I’ll also take the upside we’re
seeing in the stock market today.
The S&P 500 is moving above resistance at 1,250
today. That opens the door for more upside to end the year.
*****Is this the right time to buy stocks? Of course
the answer depends on a few things.
If you scale into positions, that is, if you buy
stock in small lots at regular intervals as you build a position in a
stock, the yes, absolutely, there’s no reason to halt your purchases just
because the S&P 500 is tussling with an important technical
However, if you are just starting to build a
position, or have end of year bonus money to put to work, I would suggest
that you tread lightly and pick you sectors carefully.
As much as I like oil stocks, they may be a bit
stretched right now. Oil prices have been pushing $90 for a few weeks
now. And we are likely near a seasonal high for oil, as oil prices tend
to put in a high in January-February and again in summer.
Commodities are also hitting levels where I would be
cautious. Still, I want to emphasize that the long-term trends for oil
and other commodities remain intact as the global economy
*****On the other hand, many technology stocks still
look cheap to me. And so do the financials.
Let’s not forget that the banks face another round
of stress tests to determine if they are healthy enough to start paying
This is clearly an important issue for banks. And
there’s no doubt that recent asset sales by Bank of America
carried out to ensure that its balance sheet will be as strong as
2011 could be a very good year for banks. It’s
likely the banks get more clarity about the value of the toxic mortgage
assets they hold. I know I’m probably the only one saying it, but these
toxic assets could prove to be quite bullish for bank valuations.