Pre-Market Ponderings – July 27
Back from my Holiday and refreshed to think about the markets.
I am not convinced the SP500 will go much past 1000. Becaused it is at 976, it doesn't have far to go before it stops. I continue to sit on a short position in SDS options against the SP500 short ETF. But this market has confounded many pros and continued higher, so I am also long the QQQQ tech ETF in an equal weight. Tech has been and will continue to be the strongest sector in the economy.
My best guess for August (next week) is that the SP500 will go sideways and then retrace back to 900-910. This will happen as the earnings season winds down and there is little to encourage investors going forward. Looking beyond the earnings "beats" of July, there is nothing in the corporate statements to lead the markets higher. Sequential revenue growth does not impress as Q4 2008 and Q1 2009 were depression quarters. We are staring at increasing unemployment well into 2010 and real estate prices continue to grind lower, although at a slower rate. This will continue to dampen consumer demand. The upcoming "back to school" and Christmas buying seasons will be poor. Consumer sentiment surveys will reflect the negative buying behavior. That will remind everyone the economy is still lost in the woods. Those reminders will occassionally result in market selloffs.
I am still 100% invested, but am considering pulling back some to cash in my retirement accounts during the next 2 weeks to preserve the past four months' gains.
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