Sunday, 8 July 2012

How to Play the Stock Market in July?

Dear Friends,

Non-farm payroll on Friday proves to be worse than expectations and Dow Jones closed down 120 points. At one point during the day, it decreased 190 points. We expect to have an Asia down day on Monday. In our last article, we did warn our readers of the possibility of missing in Jobs number after our research.

Our article on 1st July:
http://www.danielloh.com/2012/07/what-amazing-comeback-from-dow-jones.html


The important thing is what is our next step???

In my opinion, we should look very closely on our next three trading days from Monday to Wednesday. If the market rebounds, it will indicate that Wall street expects the FED to announce QE3 end of July 31st July, when there is a FED FOMC meeting. That will mean that the poor jobs number is actually a catalyst to the stock market! A good indication would be a triple digit gain in Dow Jones or 3 consecutive up days!

And that is a good possibility that is how July will be played out. For this month, Wall street might be betting on the likelihood of a QE3. And remember, in stocks, it is always good to "BUY on Expectations and SELL on FACT." Make sure we all sell our stocks before 31st July.

But, if this week, the market goes slow or drops from Monday to Wednesday, it may mean the after effects of the poor Jobs numbers. We probably need to be a bit patient to wait for any reversal.

Our Market Sentiment indicator also shows that New York Stock Exchange and Nasdaq Stock Exchange stocks have turned bullish. And this often means bullishness in the market.

Check out our daily Market Sentiment indicator:
http://www.danielloh.com/2012/07/market-sentiment-indicator-for-4-july_06.html

The important thing is I do not expect July to be bad at all. In fact, I am optimistic about July because of QE3 hype and Earnings Season. Starting from Monday, almost all US companies will start to release their earnings reports this month and next month. The media will start to turn their attention to companies' earnings. Problems in Europe has also subsided a bit because of Euro 2012 and Germany willingness to relent. China has cut interest rate a second time in 1 month. I believe China stock market may be picking up soon. Commodities and Energy related stocks has also reached a bottom because of China.

Take a look at the price of Corn trust fund this as an indication:



To sum it up, I do not expect a poor July market because of global market changes, earnings season and market speculation of QE3. And remember US elections happening in 4 months' time. Do take note of opportunites to buy instead of selling.

Regards
Daniel

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