Five Reasons to Be Cautious Now Smita Sadana Jun 12, 2009 11:40 am |
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4. The Housing Index, which is supposed to "lead" the recovery, needs to perk itself up first.Some stocks in this sector, Ryland Group (RYL), Toll Brothers (TOL), MDC Holdings (MDC) and Lennar (LEN), while still decently higher than their March lows, have refused to participate in the recent market advance and are close to April lows.
On that topic, I received a note from Minyan David, who postulated that, “if the underpinnings of an economic recovery rely heavily on the consumer, and in particular on a recovery in the residential housing market, what does this negative divergence of the DJ Real Estate ETF (IYR) portend, if anything, for the broader indices? A harbinger?”

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5. Retail is suddenly sagging.
S$P Retail (XRT) hasn’t cracked yet but several key names such as Costco (COST), Wal-Mart (WMT), Family Dollar Stores (FDO), Big Lots (BIG) are sprouting key negative divergences versus the recent market advance. Many restaurant stocks are looking substantially weak such as Buffalo Wild Wings (BWLD), Chipotle Mexican Grill (CMG), Darden Restaurants (DRI) and Panera Bread Company (PNRA). Here’s a look at WMT.

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My radar isn't catching dramatic negative shifts as it did back in January. We followed the cracks on a daily basis on the Buzz and Banter (The emperor has no clothes and Hope is not a trading strategy) and that’s not what I am encountering.
But I'm suddenly more cautious on the long side in the short term, looking for a mild correction. Or, to be more politically correct, given the recent action, you might say a "dip-buying opportunity."
Smita Sadana offers in-depth research on historical bear markets and provides you with 10 indicators she's found that together confirm the beginning of a new bull market. Learn them today so you know when it's safe to invest again. Bull Market Timer - 7 day money back guarantee.
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