Submitted by Abby Joseph as part of our
George Leong, B.Comm.
for Profit Confidential
The stock market came off its worst week this year; but even
given the minor correction, I don't think we can relax enough to
re-enter the market and buy, based on my
I think there could be a more significant market correction down
the road that could shave another five percent off the current
Yet even so, the selling over the recent sessions have driven
the key stock indices down to levels that are more realistic
compared to levels at the end of the first quarter, according to my
Simply put, the previous rate of the advance was not
My stock analysis shows that with April coming to an end, we
could also be seeing the final leg of the current six-month bull
cycle from November to April that has historically resulted in the
best gains, according to the
Stock Trader's Almanac
This doesn't mean that stocks are not worth a look for the next
six months. But if the historical cycles pan out, the best gains
may have already been made, so it will come down to stock
selection, according to my stock analysis.
Let's take a look at the investment climate at this
What's critical right now is the first-quarter earnings season.
So far, with about 104 S&P 500 companies having reported, the
results have more or less been in line with the previous quarters,
with about 67.3% beating earnings-per-share (
) estimates, according to Thomson Financial.
Another 170 S&P 500 companies are reporting this week.
Of the 20% of the S&P 500 companies that have reported, the
results have been largely mixed, but Wall Street expected this.
We saw encouraging results from several technology giants,
including Google Inc. (NASDAQ/GOOG) and Microsoft Corporation
(NASDAQ/MSFT). On the other hand, my stock analysis suggests that
some key Dow stocks disappointed, including International Business
Machines Corporation (NYSE/IBM), McDonalds Corporation (NYSE/MCD),
General Electric Company (NYSE/GE), and Caterpillar Inc.
On the economic front, stocks and commodities got slammed on
news that China may again be stalling; there could be an asset
bubble forming, based on my stock analysis.
Goldman Sachs slashed China's gross domestic product (
) to 7.8% for this year. The cut followed on the heels of a
softer-than-expected first-quarter GDP growth recently
As I said, the renewed slowing fears in China means a potential
decline in demand for commodities, such as energy, silver, and
copper used in industrial applications, and the precious metal gold
used for jewelry and as a hedge against risk, based on my stock
Gold doesn't look that good on the chart, despite rallying back
above $1,400 an ounce, based on my technical analysis. Looking
ahead, I'm not 100% convinced that gold will rally higher.
Oil prices are moving lower, which has resulted in lower gas
prices at the pumps. The Organization of Petroleum Exporting
Countries (OPEC) has come out and said it desires $100.00 a barrel
as a lower limit for oil. In the past, the lower limit was $80.00 a
barrel. The problem is that OPEC may cut its daily production
quota. But given that the U.S. now imports less oil from OPEC, the
effect on the West Texas Intermediate (
) oil price may be less, based on my stock analysis.
I would continue to advise caution. We are seeing some decent
buying support following weakness, but my stock analysis indicates
that it may be more of a red flag. Stocks will move lower, so be