“Market Call” Update To The May 30, 2011 Post. Lange Financial Services Comments. Stay The Course!

[ 0 ] June 2, 2011 |


In our Memorial Day update at DOW 12,440, the market, to our analysis, appeared to be in a bottoming phase with an increasing number of stocks beginning to act well. The economic soft patch seemed to be largely discounted. A trading range seemed likely as we entered the summer season. Our recommendation was to accumulate a package of strong and growing companies stocks during periods of weakness. ( See Favored Stocks List )

However, economic figures released in the past two days were much weaker than expected. The Dow on Tuesday was up 128 points, ignoring some soft numbers. On Wednesday the Dow declined 279 points reflecting more poor economic numbers for a net decline of 150 points. The DOW earlier today was down another 100 points, bringing the total decline to about 5%. In our recent update, we stated that the Greek debt problems could readily create volatility. Moody’s downgraded Greek debt to junk triggering the late weakness-not a surprise. Greece is on the verge of default.

A key number short term will be the Friday job numbers. ADP private sector jobs report today amounted to 38k vs an estimated 187k While the soft patch is softer than anticipated, we still expect an improving economic environment in the second half of 2011 into 2012 for reasons outlined in May 30 update, in effect reflecting a reversal of the factors that caused the soft patch to begin with.

Our investment policy has been to accumulate strong companies during periods of weakness seeking to establish a good average price. While some caution may be warranted over the shorter term, we see little reason to temper our positive investment outlook over the next six to nine months despite near term economic softness. Selectivity will be of paramount importance when initiating new positions and adding to existing holdings.



Category: Economics, Markets and Trading