Market Floor

There are some negative factors that argue for a sloppy market, not the least of which is the meltdown in financial stocks that is spreading around the world. However, I believe the following three factors will put a floor under the market in the near term:
  • The Berkshire takeover of Burlington Northern.
  • The impending closing of Merck/Schering Plough. They are still waiting on Chinese approval.
  • The oversold condition of the market.

4 comments:

MarketCynic said...

I really don't think fundamentals matter now, its all a technical trade at the moment. Look at how the market reacted to ISM yesterday and to blowout earnings by tech companies 2 weeks ago. I don't think buyers all of a sudden become more aggressive because Berkshire bought Burlington Northern. If we go up, it will be because we were oversold.

Tsachy Mishal said...

Merger arbs buy BNI from shareholders. BNI shareholders take cash and put it into other stocks. Thats why its bullish.

Anonymous said...

Without trying to nail every day-to-day movement, doesn't it seem as if the general intermediate-term trend is now down?

Tsachy Mishal said...

I do believe we are in an intermediate move lower but catching a 20-30 point move in the S&P 500 is worthwhile for me even in the context of a downtrend.

The long term is a series of short terms. Its completely possible that we get a short term rally and then there is another reason for a short term rally that follows.