Stocks refuse to give in but they have been unable to move out of the danger zone either. The U.S. stock market could still swing either way.
Take a look at the New York Stock Exchange Composite Index, for example. At the beginning of last week the index fell through its February low, threatening to break through that level of support and turn a correction into something worse. But by the end of the week the index had moved back above the February low and looked like it was trying to make a bottom.
You can see the same pattern—with perhaps a little more of a positive tilt—in the NASDAQ Composite Index. The NASDSAQ has held above its February closing low of 2151 but just barely and the index has whipped around between 2150 and 2300. Each sharp drop is followed by a sharp rally.
In the case of both indexes and the stock market as a whole I’d say that this back and forth in a narrow range is a good thing—it’s building a base for a future advance—but only if the market can break out of the top of that range.
Otherwise instead of becoming a base, this range will become resistance that will cap the next rally—from a lower price because absent a break to the upside the longer term trend is still downward.
Right now we’ve got volatility with no direction as stocks try to decide whether to break or continue that downward trend.
Ed; My old lava lamp is showing me this sludge makes the surrounding liquid move more slowly. So, the absorbed heat will be released further south than is usual. Wish I could invest in Carolina to Maine saltwater fishing this summer/fall. Maybe the spill will kill off those poisonous saltwater snakes that came thru the Panama Canal.
nocnurzfred,
First, let me say I’m no climatologist. Now for my uneducated guess: I would expect the oil in the water to absorb the solar radiation and heat up the surrounding water, leading to a rather nasty hurricane season (as already predicted). I am not sure what the longer term impact on winter weather will be.
To the rest of you,
Stay away from BP. It has become a political cause, and that is VERY dangerous.
Here is the best case scenario, and it’s not impossible either. BP caps the spill, and the remaining oil eventually becomes spread out and diluted by the ocean currents, to the point of negligable effect. The politicians lose interest in BP when they see there really isn’t much damage after all. The fishing industry returns to the Gulf, and the tourists come back. The tort lawyers go away when it becomes unrealistic to pursue litigation with no long term injured parties, although many short term cases still go through.
Granted, this is best case scenario, and it will take years before we could reach this point. But this doesn’t even begin to happen until BP caps this spill. Until then, this scenario is moot, and BP remains radioactive. Even after BP caps the spill, you need to see what happens to the oil that’s already in the water.
How do we all think on how this spill will affect the Eastern coasts winter weather. My quick take is the oil will absorb the solar radiation & slow the warming north flowing currents. Colder Northeast winter, maybe? If so, should we be buying the energy suppliers now?
I read somewhere that they are self insured indeed.
Re BP: Hold on to your hats this spill in no way resembles the magnitude or nature of “X” spill. This is new ground we’re covering.
GM
100 Billion, Insurance coverage of cleanup; something to consider:
“BP motives come under scrutiny in Congress”
http://fieldnotes.msnbc.msn.com/_news/2010/06/14/4509432-bp-motives-come-under-scrutiny-in-congress
I would not want to bet that a criminal finding, (or negligence) will be covered by insurance; and /or that BP’s liability would only amount to $100 Billion.
Keep in mind:
Right now its only 4 states; but who wants to buy a gulf oyster/fish for dinner? Who wants to go to florida if the beaches might be compromised? (P.S. 90% are not, but many, many people are cancelling, and every hotel, motel, fishery, sport fisherman, etc. in florida, wants compensation from BP).
The leak has not been stopped yet, if the gulf stream starts sending the oil up the Atlantic coastline it could be alot bigger mess/cost this fall.
viwi,
I agree that BP is probably a pretty safe bet right now, but as far as insurance covering the cost of the clean up, I’m not so sure. A corporation the size of BP is probably self-insured.
How low do ya’ll think BP can go?? Sounds like it would be a stock to invest in after the dividend is suspended…MHO only! 🙂
Run26.2,
Personally I would say the very fact that you and others got burnt is a plus to deciding if to invest in BP. With lots of people getting burnt, lots of people dump stock and most likely cause it to overshoot based on emotions instead of what is really likely to happen.
Also for a person that owned the stock before the problem, you need it to come back to where it was before the problem. For a new investor that buys at 45% down, the company doesn’t have to come back to it former value for them to make a ton of money.
Personally on the actions of BP. I doubt you could take the top run company in the world, give it the same situation and have much of a different result. People are dumping it more for anger and fear then the numbers, or even the true likelihood of it completely failing. Oh sure maybe the better company might have only lost 45% instead of say 55% value, but that isn’t really that important to the new investor or to the end results.
BP,
Its either a $50 stock or a zero, not a $30. I think its probably a $50 and have bet big on it.
Ethically, its not the greatest but the regulators (ie US gov) has far more to do with the mess than BP. I think if dividend is suspended it will give a decent pop to upside in hopes of saving the much needed cash.
caveat- I’m often wrong:-)
Run26.2: Any investment is based on speculation. You can manage your risk by carefully evaluating company’s assets. My point is rather simple: the company’s capitalization is down by almost $100 bln, while there is no way that it will cost them that much to take care of the mess. Part of it will be covered by insurance. I was looking all over the web, and that is the only reasonable evaluation I found http://www.marketoracle.co.uk/Article19603.html, which is based on a pure technical approach.
viwi… speaking of BP, this from Congress:
http://energycommerce.house.gov/documents/20100614/Hayward.BP.2010.6.14.pdf
I owned BP prior to the explosion and waited thinking they would handle the situation. Wrong. I sold, but waited too long. No way I would touch them now (I have zero confidence in their leadership). If you think about buying, I would only buy a piece of your entire position at a time. Too much bad news to move the stock down. The only potential upside is when they can their CEO. Plus, if they delay or suspend their dividend the stock will sink further.
IMHO a purchase in BP now is total speculation and I would only put in as much as you thought you could lose.
Jim,
Is it possible to evaluate the fate of BP? Stock lost half of its value, but it will not take $100 bln (the amount of equity lost) to clean up the mess. If I look back at X after Alaska spill, it was pretty much the same story. Will the history repeat itself?