FYI | Jun 22 2012
by Peter Switzer, Switzer Super Report
Regular readers who label me as a generally optimistic investor might have noticed I have been negative since around April when I thought the run up of share prices from last October had to come to an end. A pullback or correction was on the cards and the entry of Greece, Spain and all of the European Union’s debt problems have helped to drive stock prices lower than they needed to go.
But now I feel like I’m having a ‘Kath Day-Knight moment’ . Yep, as Kath from the television comedy series Kath & Kim might say: “I can feel it in me waters that we could be in for some upside.”
What I’m noticing
Let me piece together the positives that I am seeing right now. Here they are:
• The VIX, or fear index, has eased to around 17 from the high 20s a few weeks ago, meaning investors are less fearful.
• US markets are above their 200-day moving averages and that line is trending up.
• Ben Bernanke is not desperate enough to go for a third quantitative easing stimulus package (QE3) and while I think he is keeping his powder dry in case Europe screws up, I think he is also betting that the US economy might just be able to get out of this current slowdown without more money supply expansion.
• On Europe, I liked the recent J.P. Morgan analysis that compared the attack on Germany by other EU countries, as well as the USA, telling it to give some ground on either fiscal austerity or Euro bonds or anything that helps both the banks and governments of the eurozone, to “a group of hyenas trying to bring down an elephant.” And then CNBC’s Art Cashin of UBS pointed to the headlines that the German Chancellor, Angela Merkel, is starting to give some ground on some bond funding.
• I suspect the G20 meeting made some progress on helping Europe and the International Monetary Fund (IMF) secured more funding.
• The fact that central banks are stiffening up for a rescue bid if something goes wrong on financial markets is also a plus.
• We are seeing better economic and policy stimulation news out of China.
• The share prices of BHP and Rio Tinto are heading up.
• The Aussie dollar is now above parity.
• And Lance Lai, my charts guy from my Switzer program on Sky News Business channel, who has been negative and on the money, is now seeing bullish signs in his analysis of the S&P 500, the German DAX index and the Shanghai Composite. You can read his note in today’s report for more on that.
The risks
Sure, the Europeans could ruin all this with a bad play, a big-mouth official or some crazy government decision, but I feel it in me waters that we could have a ‘short-term’ period of better stock prices.
Unfortunately, I can’t see the needed big-bang piece of good news that will spark this. But it will come, and that will really spark a lot of positive heat into the stock market.
I hope it comes sooner rather than later, but I suspect we have a bit of a wait on our hands.
Peter Switzer is the founder and publisher of the Switzer Super Report, a newsletter and website that offers advice, information and education to help you grow your DIY super.
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