The Bulls

The S&P futures are currently trading over 10 points below fair value. I was not expecting this deep of a pullback but still believe that the bulls deserve the benefit of the doubt in the coming days.

My reasoning for a near term bullish outlook has not changed. The very negative sentiment towards equities and the oversold condition of the market should buoy the markets. Seasonality is still negative but the most negative part of the seasonality has passed and will soon turn positive.

In my portfolio I have been sticking to companies that are cheap, have less economic sensitivity than average and are actively repurchasing their own shares. This tactic has started working very well in the past week. Over the course of the Summer animal spirits will likely remain subdued. Holding value names where companies are aggressively buying their own stock will likely continue to outperform under these conditions.

3 comments:

Anonymous said...

I can certainly appreciate stock picks like VOD, but predictions of where the market is going are dependent on where the dollar is going. Where the dollar is going hangs on the daily perceived health of the Euro which in the short term is tied to Greece. And CR tells us today that we can expect negative economic data for the next 2 weeks...

Tsachy Mishal said...

I beg to differ. I believe buying when sentiment is extreme and the market
is oversold is a good risk/reward trade. It doesnt work every time but it
does work more times than not. Predicting the direction of the dollar is
harder IMO.

Anonymous said...

The question is where is oversold and when does bad news not drive euro and stocks lower.  Stocks tend to reverse and rally into bad economic data towards the end of the short term downtrend.  That could be next week when markets rise on a bad #.  We're still falling.