Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Prieur Perspective: New Wave of Risk Aversion Hits

By

Uncertainty takes its toll on markets worldwide.

PrintPRINT
Richard Russell highlighted the latest statistic from Lowry Research, saying:

"Turning to the current market, what to me is most significant is that Lowry's Buying Power Index (demand) is collapsing. As a matter of fact, it's now below the level that it was on March 9. Meanwhile, the Selling Pressure Index (supply), after moving sideways for months, is now trending higher. This is a bearish combination and calls for a very defensive stance. On top of everything else, total NYSE volume is fading, particularly on days when the broad market is higher. It's obvious that buyers of stocks are becoming scarce. Despite 'Green Shoots' nonsense, the stock market doesn't like what it sees. And neither do I."

The last word on stocks goes to Teun Draaisma, highly regarded equity strategist at Morgan Stanley, who argued that there were "plenty of opportunities to make money beyond the market direction call" by pursuing a strategy that he described as "the middle ground," as reported by the Financial Times.

"Macro and the next big market move have become everyone's favorite investment topic over the past 2 years. We suspect it is time to move on to the micro of sectors, stocks and styles," he said.

Draaisma's large "middle ground" of investment opportunities includes "the forgotten market" Japan and "sectors that are cheap and under-owned with improving fundamentals" such as utilities, telcos, and energy. Also "buying stocks with a management change, financial restructuring, or a change of focus can be very lucrative."

The technicals undoubtedly look ugly, and investors will now focus on the second-quarter earnings reports as a test of whether stock prices have run away from fundamental reality. While investors wait for Mr. Market to show his hand, a cautious approach is warranted but that shouldn't preclude one from finding stocks that look cheap.

For more discussion on the direction of stock markets, see my recent posts Stock Markets Rolling Over, How to Play a Stock-Market Correction, Technical Talk: S&P 500 -- Expect Retest Sequence, Rosenberg Interview: Cold Truth About the Economy and Markets and Video-O-Rama: Fresh Wave of Risk Aversion. (And do make a point of listening to Donald Coxe's webcast of July 10, which can be accessed from the sidebar of the Investment Postcards site.)

Economy

The latest Survey of Business Confidence of the World conducted by Moody's Economy.com says:

"Global business sentiment continues to improve. At the start of July confidence is as strong as it has been since the start of last October. Expectations regarding the outlook towards the end of this year rose strongly again last week to their highest level since spring 2006. Business sentiment remains consistent with a global recession, but the downturn is quickly moderating."

Edward Hugh (Global Economic Perspectives) said:

"Global manufacturing took another step towards growth in June -- but the process was, as ever, uneven. The JPMorgan Global Manufacturing PMI posted 46.9, its highest reading since last August. Only 4 PMIs -- those for China, India, Turkey, and Sweden -- posted growth readings in June (although Sweden is not included in the JPMorgan survey). There was a general easing in the rates of contraction recorded elsewhere. The next 2 to 3 months will now be critical in order to decide whether the [manufacturing] sector is going to move over to expansion mode, and if it does, at what pace."

No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
PrintPRINT
 
Featured Videos

WHAT'S POPULAR IN THE VILLE