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Stocks show signs today of having more fuel in the tank

posted on March 9, 2010 at 4:32 pm
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I wouldn’t get complacent about this rally but it passed some milestones yesterday and today (March 9) that argue it has some more room to run.

Here are the positive signs:

  • In the final hour today volume picked up. That’s a huge positive because if a rally is to continue more investors have to participate as prices go higher. Falling volumes, which the market saw on Monday, indicate that investors are stepping aside as prices rise. Higher volume at this point in a rally—this move upwards dates from a low on February 8 at 1057 and as of the close today now totals 7.9%–usually means that some big institutions have decided that stock prices show enough upside momentum for a buy.
  • The NASDAQ Composite Index has broken above its January 19 high of 2320 to close at 2341 today. Technology stocks are usually a key sector leading any rally so a new high from the technology-heavy NASDAQ is a big plus here.
  • The Dow Jones Transportation Index closed above its January 11 high of 4263 at 4269 today. Much of the recent strength in the index has come from railroad stocks, which tend to move up when investors believe that economic activity is picking up. The Dow Jones Industrial Index often follows the Transportation index upwards.

Don’t get carried away. This is a time to let what you already own run higher rather than placing big new money bets. We’re in March—which means we’re looking at the end of the strongest six months of the year for the stock market in May and the beginning of the weakest six months.

This rally might also be a good time to sell anything that you’ve been holding onto hoping for a recovery.

I don’t think we’re looking at a crash or anything of that magnitude in the months ahead but do remember that this rally isn’t built so much on good news as it is on relief that our worst fears—a default by Greece, a meltdown of the euro, a contraction in economic growth in China—have turned out to be over blown.

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39 comments

  • EdMcGon on 9 March 2010

    Jim,
    I read it this way: Now is a good time to buy IF you have a good undervalued stock whose growth prospects may not be affected by a minor economic slowdown. Of course, that’s a lot of “if’s”…

  • mopama on 9 March 2010

    Ed,
    I read this way: Statistically April is a very good month. It could be the beginning of positive jobs report. That will help a lot to get indexes higher until May. Usual Summer correction.

  • r0b1rt on 9 March 2010

    Jim and EdMcGon:
    I’m wondering if steel stocks such as X, AKS, MT might fit the parameters of “relatively” undervalued stocks unaffected by a minor economic slowdown. They have been getting a lot of press recently re upcoming major price hikes and huge demand for steel in China. Any thoughts?

  • henry2009 on 9 March 2010

    The most under valued stock is C. I have been buying C in the 3.10′s

    However, I know Jim doesn’t like it. Like other readers Jim is my favorite writer and analyst. However, to be honest Jim made some wrong timing calls recently and I think he needs to adjust his understanding of this econ cycle. Like Jim said he never really trusted this rally. When he finally is convinced that this rally is true this rally will end.
    Still I have high respect on Jim

  • bsdgv on 9 March 2010

    Is this good news or bad news for C?

    “The story going around trading desks is that the Treasury Department is about to announce plans to sell its stake in Citi (C).”
    From:
    http://www.ritholtz.com/blog/2010/03/citi-rumor-moving-shares/
    Make sure to read the comments as well.

    If I decided buy a $3-stock, I would pick one that will not be sold massively by the Treasury.

  • Upside on 9 March 2010

    Ed,
    Please start your own blog. This is Jim’s space. You have multiple comments on every article.

  • henry2009 on 9 March 2010

    bsdgv

    Wrong. It is just the opposite. Let government sell what they want. Mutual funds and hedge funds will be buying like crazy. The institutional ownership of C, currently 35%, is the lowest among major banks. After the sell off C will really take off !

    I admire Jim in his in-depth analysis and read every of his article. However judging from his track record he seems to be pretty good at following trends but not very good at adjusting at trends reversals as evidenced by his amazing exceptional performance during the last long stretched bull markets when the major trend was basically up and his poor timing in 2009 when the major trend took a huge reversal. He did not do very well in timing either in the recent Jan to correction (He thought the correction would not be done when it was done). I really hope he could improve his performance by rethink about trend reversals and economic cycles. No one will be always right in timing. But making the wrong timing at historical major trend reversals is a regret for people as smart as Jim.

  • bobisgreen on 9 March 2010

    henry2009,

    Jim has written about his mistakes in previous articles. Jim shines in his “doctoral thesis” concerning global trends, sector trends and astute analysis of major and minor players within them. Regret over missing major or minor trend reversals for “people as smart as Jim”? We shouldn’t forget he has no crystal ball or inside information. Neither do you or I, for that matter. I do like his percentages over time (remember even in a bull market you can lose if you choose poorly!). That’s the reason I keep reading what he has to say…because he gets it right “most” of the time (or at least enough to rack up huge percentage gains). You are right about no one being always right in timing…I just don’t spank him for 2009 and early 2010.

  • sk on 9 March 2010

    The expectation that the TD will sell C in the future is already priced into the stock. The problem however is volume spikes like the one we had today in C, AIG, FNM, FRE which were probably based on rumors in the market. These volume spikes could happen in either direction and makes them very risky.

    Jim, although the volume was somewhat better today, the overall trend remains that volume is lower on up days and high on down days. Do you see the retail investors picking up stocks ? Now that mutual funds have exhausted their cash?

  • henry2009 on 9 March 2010

    Jim shines in his “doctoral thesis”

    As I said I admire Jim in this in-depth analysis. But investment is all about making money not reading doctoral thesis. Actually I have another suggestion for Jim which is making his doctoral thesis more concise to save readers’ time.

    If I were Jim I would rethink about my thesis about major trend reversals and how not to make the same mistake again next time. Jim’s blog is a good source of info and analysis but not nearly good as investment guide.

  • Run26.2 on 9 March 2010

    henry2009… to a certain extent, I agree with you. I tend to use Jim’s picks as a starting point, but never buy just b/c he is buying. I tend to be more of a value investor and my timing tends to be much different than Jim’s. I do appreciate the stock ideas he makes and many are one’s that I do further DD on. Some, like LYSCY, I would not touch b/c it is much too thinly traded for my taste.

    The trends and macro discussions are particularly helpful to me.

  • andante on 10 March 2010

    EdMcGon,
    Thanks for the interesting posts. Keep the color coming.
    Jim,
    Thanks again for the great top down analysis —– and the puns.

  • DJBarber on 10 March 2010

    “China’s Export Recovery Adds Pressure to Pare Stimulus Measures ”
    http://www.bloomberg.com/apps/news?pid=20601087&sid=ae8am8oYayPM&pos=1

    Jim/Henry/etc…
    Jim has said many times that he is not great at timing the market (i.e. entry and exit points), I read that as “I” better get good at those things myself.

    You will often find that Jim’s advice precedes the rest of the market by days if not weeks.

    As somebody who has multiple 100%+ individual stock pick gains based on Mr. Jubaks sage advice, I respectfully posit that perhaps you need to do some of the work yourself. Perhaps YOU need to get better at determining trend reversals and then enlighten us…. That would at least be constructive …And you said “exceptional performance during the last long stretched bull markets when the major trend was basically up” he’s been doing this since ’98 (During the .com bust) , and was consistent throughout, perhaps you missed those years when he avoided the worst by a country mile…
    If you are consistently getting burned by your own timing, and my read on your statements is that you are, then maybe you need to sit down and get better at those things yourself.

    I don’t believe Jim is perfect, but there isn’t anybody out there with the same degree of accuracy, day in, and day out, as Mr. Jubak (Except that crazy guy from Omaha, who’s into trains and candy, whats his name again…?)

    The long and the short of it is, we need to take responsibility for trading our accounts ourselves, and I am certain that Jim is looking at ways to get better at those things that he himself deems worthy of “getting better at.”

    “you can lead a horse to water, but you can’t make him think”

    (I think that should count toward a point or two in my account for an effective use of a pun)

  • DJBarber on 10 March 2010

    Just to be clear .. That
    “you can lead a horse to water, but you can’t make him think” crack, was not directed at Jim…

  • ticktock on 10 March 2010

    So, is there now going to be a limit on how many times someone can post a comment after an article? Or maybe X number of comments a day or a week. LOL.

    Moving along to one of Jim’s specific stocks, did you all see the announcement by Cisco concerning their new ultra high speed router? Investor reaction seemed to be lacking but as a very active downloader/uploader myself I see this as further indication that broadband costs will decline as speeds also rise. This has major implications not only for Cisco, Yahoo, Google, etc. but for the cell phone carriers along with media providers like Netflix and Apple.

    AT&T’s CEO recently made one of his usual stupid comments about how the company will soon need to meter data usage due to a certain segment of customers who abuse the unlimited feature. iPhone owners maybe? Instead of embracing technological advances AT&T remains committed to the business model of screwing people in every possible way while also holding back as long as possible the introduction of equipment features typically enjoyed in Europe and Asia up to a year before seen in the USA.

    There is a very wide, and increasing, gap between companies trying to stay at the front of the convergence of information flow, or at least hold on for the ride, and those who fight to keep outdated business models and a captive, and ignorant, customer base.

  • gusspresso24 on 10 March 2010

    Henry, Jim’s not a day trader. He’s an investor focused on long term profits which means he is doing his best to avoid significant risk. He goes after the fundamentally sound companies with intrinsic value and solid prospects for growth, and for the most part stays away from things he considers to be speculative. That means he’ll pass up gambles like C in favor of fundamentals like Banco Santander. It sounds like your beef with him is more a difference in strategy.

    Personally speaking, the longer the “doctoral thesis” the more I like them, and Jim’s the best investment guide I’ve found yet.

    Luck never gives; it only lends… but luck be a lady tonight.

  • EdMcGon on 10 March 2010

    mopama,
    My crystal ball doesn’t reach this summer, and this market is too unpredictable to necessarily follow past trends. However, I am feeling exceptionally bullish at the moment.

  • EdMcGon on 10 March 2010

    r0b1rt,
    Regarding X, it’s a cash bleeder. I wouldn’t touch it.

    I don’t really know enough about AKS or MT to comment on them, although both of them have shown improvement in their financials in the last 2 quarters. MT is the more intriguing of the two, but not enough to make me want to buy it.

  • cwt334 on 10 March 2010

    Jim,
    Thanks for your excellent analysis. Anyone who thinks they can time the market, good luck. Keep it coming. Thanks to everyone who adds to this blog with well thought out comments. I think it is a great group and I have learned a lot.

  • EdMcGon on 10 March 2010

    Upside,
    Last time I checked, this is Jim’s blog, not yours. If Jim wants me to stop commenting, I will. If he wants me to comment less, I will. I am here as his guest, as are you.

    Having said that, I have toyed with the idea of starting my own stock blog (I already have one for politics). I’m just not quite ready to do that.

  • taterbug820 on 10 March 2010

    I vote for more comments in this section. If you don’t want to read them, don’t. I would also like more banter, puns and sarcasm! This is a great site for the less knowledgable. The more opporunities there are to read about different opinions and ask ?’s the more money we may all be able to make. Isn’t that the point? I was actually wondering yesterday how many people actually read the comment section?

  • EdMcGon on 10 March 2010

    andante & everyone else,
    Thank you all for your kind words. I’m not perfect (if I was, I’d be rich). Having said that, I must repeat DJ’s words:
    “The long and the short of it is, we need to take responsibility for trading our accounts ourselves, and I am certain that Jim is looking at ways to get better at those things that he himself deems worthy of “getting better at.””

    THAT is my goal, as I suspect is true of most of us here. It is my hope that with Jim’s guidance, and by helping each other, we can all become better investers here.

  • amtrend10 on 10 March 2010

    The chances of C dropping 33% are far greater than say msft. And it has to double to make you $3. There are a lot of stocks that will make you $3 every week. If you weigh risk/reward (honestly of course) C would be a better buy after it (and the other banks) has proven tnat their books are real and their strength is sustainable.

  • EHG on 10 March 2010

    I fully agree with ctw334. I also think that comments help enriched the site. Jim simply does not have the time to answer all of our questions. People have been very open to share their views, tips and knowledge. For example the discussion on dividends and closed end funds was very helpful. I got many tips

    I don’t see the point of questioning Jim’s market timing skills.

    I agree with Ed. Jim should be the one to set the pace of the blog

    Thanks again Jim for a great site

  • BenWobbles on 10 March 2010

    I’ve been following Jim for many years and always looked forward to his MSN Money articles. Having this new blog is so much better because of the great format and additional content.

    I’ve made money, learned a lot and become a better investor.

    Thanks (again), Jim!

  • Seaturtlelady on 10 March 2010

    I’m grateful to have found this site and appreciate everybody’s posts! I’ve always been an avid believer in sharing the “wealth” of knowledge. In education, we call it “networking” and it’s a wonderful tool to grow professionally!

    Many thanks for everybody’s willingness to share!!

  • turniptruck on 10 March 2010

    Jim does a fantastic job at what he does. In my opinion, trying to time the market is like chasing fool’s gold. I have had good success combining Jim Jubak’s stock picks with some of Ray Lucia’s general investment advice. It can take a lot of patience at times to make money in the market, sometimes excruciating patience! But if you believe in a company and dollar-cost average when the stock price is falling, it can pay off nicely. And sometimes you just need to step away from your computer screen for a while when it’s driving you crazy. Just step away……

  • rolfer1 on 10 March 2010

    Upside – I agree – it seems that EdMcGon has a wealth of opinions and lots of time to devote to this blog. However, reading different opinions is interesting.

    I do wonder if Jim responds to anyone but EdMcGon and the few other frequent bloggers on this site (while other’s opinions are “interesting”, I give them very little consideration and am here to hear from Mr. Jubak himself, whom I’ve followed seemingly forever on moneycentral.)

  • Seaturtlelady on 10 March 2010

    Rolfer1…

    Jim has responded to my posts in the past and have read his response to a few other folks on here too! :-)

  • Seaturtlelady on 10 March 2010

    Rolfer1…

    Forgot to add that my posts were questions rather than opinions!

  • r0b1rt on 10 March 2010

    I very much respect and appreciate EdMcGon’s commentary. Like other contributors, he provides an excellent additional perspective on what is happening in the marketplace. The plain fact is that Jim replies only occasionally to reader questions. I appreciate any help I can get in trying to make sense of the volatile world of stock picking. Thanks again Ed!

  • mopama on 10 March 2010

    Ed,
    As you know I keep a longer time horizon in investing since I have 20+ years before retiring. In my case, that time horizon is more or less 60+ years. ;-) . For that I really need to monitor so many summers.
    That said, sometime I play different kinds of investing methods with a smaller account, just to have fun and validate some of my personal or borrowed opinion(s) on the market/stock and similar.

    To ALL,

    I am for sharing ideas through comments.

    I have *full* trust and *high* respect for Jim.
    People forget really soon.
    I believe it was very smart for Jim to make the investment calls he made and continues to make. I spare you to fill in the blanks for what we experienced during this Great Depression – we ALL know – and who don’t than is a ‘blind’ investor. So many things could have gone wrong. Mind you so many thing could STILL go wrong. We are not over yet. We all have to just wait before judging on someone else ability to ‘see’ further. Oh, and in my full trust on Jim, it does help having following him for so long. Last but not least Jim always fully motivates his investing ideas. People are free to agree or disagree.

  • jearly on 10 March 2010

    Ed,

    Keep your responses coming for all the reasons others have already stated. If people don’t want to read your opinion they can scroll past. While I come to this site to read what Jim writes, I enjoy your input as well other’s.

  • EdMcGon on 10 March 2010

    Ok guys, you’re making me blush…

    mopama,
    I don’t believe there is any one “perfect” investing method. Different methods have worked at different times in the past.

    For example, I still remember my dad telling me to never buy a stock with a P/E greater than 15. While it’s not a good rule anymore, I’d still call it a good guideline.

  • georic on 10 March 2010

    amtrend10, you raise a very important issue: what is real and honest for a company?
    For banks, they have to assess risks and can make their results look completely different when they choose to mark down an “asset” by 10, 30 or 70%.
    For other companies, there is stock valuation, trademarks, customers accounts…
    Boils down to the fact that, even without cooking the books, managements can make profits look widely different as needs be.

  • catengineer on 10 March 2010

    Ed,
    Now you see how it feels to be Europe and California….everybody’s trying to run you off too =)!!

  • Jim Jubak on 10 March 2010

    Just a word on my attitude toward posting comments. As long as it’s posted with respect for others, as long as it is an attempt to share useful information, as long as it is an honest question, as long as its an attempt to share a feeling or a joke, then the more the merrier. My ability to post varies wildly with the swing in my work load. And I appreciate the efforts that everyone has made in the first 8 months of this blog to make this a useful community. I’m very impressed with you all. Thanks.

  • YX on 10 March 2010

    Ed and others:
    I enjoy many of you multi-commentators and often find your postings interesting and even useful. It’s all part of “Juback experience”. If anyone doesn’t want to see any comment, simply skip it and spare the rest of us.

  • EdMcGon on 11 March 2010

    catengineer,
    Don’t get me started on Europe and California…

    Jim & YX,
    I thank you both!

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