Today's Market
by Dr. Invest


So you didn't listen to my advice and bought into the market last night. Now you know that the market can leave you in a precarious position when it suddenly drops 265 points. (Dow Jones) Even though the market fell 2.19%, you can learn an important lesson. Good news from the politicos doesn't always result in a market bounce. (Market Bounce: When the market is lower than expected and good news seems likely spark investors into buying stocks.)

The market may return to life once again with a big bounce, but remember the tide is moving out. (Look at the chart in yesterday's THE MARKET blog.) There is a strong likelihood that the market will continue moving downward. If you are a swing trader or long-term trader, now is the time to wait. I hope that I have proved that point by warning you about the forceful direction the market would take today.

If there is a rally in the market, it will likely be a SUCKER'S RALLY. (Sucker's Rally: Market moves up three or four days, and it seems that you must get into the market so you won't miss out on all the good deals. You buy, generally at the end of the rally, where the market suddenly resumes its downward trend.) You want to re-enter the market when you know the conditions are favorable for continued growth.

Favorable conditions for a return of strength to the market will include: strengthening world economies, a strengthening national economy, an increase in durable orders, a decrease in debt obligations both nationally and individual households, increased profits in various sectors. (For example: the oil sector is projected to grow. Reduced oil production in Lybia and Egypt with an increased demand for oil by Europe, India, and China, should increase the cost of oil per barrel. A number of financial analysts suggest that oil will rise to $130 per barrel by the end of the year. The oil sector will likely be profitable into the months ahead regardless of how the general market may perform; however, in the market everything changes and rapidly, so care must be taken when purchasing stocks in a sector that seems weighted for growth.)

I placed STOP SELLS on all of the stock investments in my portfolio, expecting that in a downturn, most of my stocks would sell. One investment with a STOP SELL is an oil stock called, PETROHAWK or (HK). I purchased HK at $26.46 in February. HK was purchased by BHP so that HK's price rose to $38.14 or a total increase of 44.10%. I fully expected HK to break the STOP SELL, but today, with the market falling 2.19%, the HK stock only fell 0.18% and in the past 5 days of market decline, HK even made profit over that 5 day period.

This doesn't mean that HK is a good buy, but the likelihood of HK retaining its market strength or even growing is quite high.

(Note: this article should not be taken as investment advice and is for entertainment and discussion purposes only.)