Stock Market Actions, 26 July 2007

At this point, the DOW is down about 400 points.  This was the market mini-correction that I called at the start of the summer.  It was just a matter of time before the oil prices, mortgage mess and the multi-year increments in interest rates caught up with the positive trend.

So, I am about a month off, but again, I was cautious because some of the smaller caps had showed their signs of downward trends a lot earlier than the larger caps.

Much of the positive gains were due to M&A activity.

Now the question is what next?  Well, the trend will continue until some of the problems that have surfaced for many months clear out.  Problems like what?  Well, the downward trend in the housing market, the rise in oil prices and the settling down of M&A activity.

Take this for example –at this time ABN AMRO is up for bidding near $100 BILLION DOLLARS.  Where’s all this speculation coming from?

There’s a lot of risk floating around and all that has to settle a bit.

Is there any good news?  Yes, if you look at the EPS numbers, they are not very high.  In fact, the average is around 16 Times Earnings per Share.  The stocks are priced at around 16x Earnings.  So, that is not bad at all. 

This summer has been a time to raise cash, and that trend continues until there are clear signs that the market has “turned positive again”.

Rich Sage