October 1st, 2008

Toll Bros. and REITs; both hardly suffered a nick.

Some of you are probably saying, “Guru, what were you on when you wrote yesterday S&P 500 1040? Today’s gain was the largest since 2002!”

Ho-hum, I’m not impressed. Volume was low, the market is still technically weak (advance/decline ratio, new highs/new lows, relative strength, etc.). Today’s action represented nothing more than a bounce after getting trounced yesterday.

When you look around it seems the world has turned upside down. The $US was supposed to go into the toilet as a result of all liquidity pumped into the economy but instead it’s improved 12% against the Euro in less than two months. Oil was headed to $150 and soon $200, today it’s around $100. Gold and silver, the hard commodity hedges against a drop in the $US are down by up to 38%. The place to put your money are companies due to increasing softness in the economic was in stocks with large foreign exposure; the word today is that economies around the world are in worse shape than ours. What happened to the BRIC countries, their demand for steel, copper, foodstuffs, machinery and equipment, elevators and cranes …. poof, they’re gone.

No wonder it’s nearly impossible making a buck in this market. You think you have it figured out but by next week not only has the rules changed, the game has changed and it’s moved to another field.

Even so, we continue the process of searching out the early movers, the “leaders” after the market bottoms. Making money the beginning of the life cycle of a new bull market is as easy as shooting fish in a barrel. Nearly every stock has been decimated by the Bear Market, cash on the sidelines (like yours) is pouring into the market and prices are being marked up to more “normal” valuations.

I want to point you to two previous suggestions that continue to look valid and appealing (note charts are dated as of the previous post):

Both these suggestions have performed extremely well even while the market has declined 13-16%. Each time there is a bounce in the market as we saw today and may continue to see for the next few trading sessions, both these suggestions notch a little higher. And during the trouncing we had yesterday, they hardly suffered a nick. Keep your eye on these.

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