LANGE FINANCIAL SERVICES MARKET UPDATE. 10.16.2011 5:00PM SUNDAY
A week ago Tuesday, October 4th, the market hit a new intraday low falling almost 20% from the April high. The market then reversed the same day sharply to the upside with a high-low range of about 400 points. Last Sunday night, as all bears stayed bearish, we posted a memo saying “TIME TO BUY NOW”. In effect, we were positive during the bottoming process though the weakness into September 30 exceeded our expectations due largely to:
1] The Euro financial crisis.
2] Widespread forecasts of an imminent recession.
3] Forecasts of a China collapse.
These events created a hedge fund redemption panic into the end of September, in effect setting up a great buying opportunity. We were of the strong opinion that the well-known negatives were discounted.
Given the number of factors negatively impacting the market, many stocks had declined to ridiculous levels. A significant rally seemed likely supported by numerous technical factors. On a closing basis the DOW has now rallied some 900 hundred points .We recommended about 15 stocks in our Buy Memo, all of which are up sharply.
We still look for higher valuations into yearend as:
1] Moderate economic expansion seems likely.
2] The European financial crisis seems likely to be resolved though it is likely to remain an issue.
3] China and the other emerging countries seems to be stabilizing economically and are about to grow significantly again.
To our fundamental and technical analysis and despite the recent strength ,we still look for higher equity valuations into 2012.
Would view any near term profit taking as a further buying opportunity in well established growing companies. See memo dated October 9 for additional background views.