Give ya, Libya
8;06 am Tuesday 1 March 2011
I am not claiming this to be a rule of thumb, but being involved in various market over quite a period of time, I have come to learn that traders and investors tend to follow short-term unorthodox indicators to guide their positions. In today’s case where the Middle East is the obvious stimulus for trading, I think the big traders and hedge funds are using oil futures as a trading indicator. Oil is down over $3 from its high while the developed markets are up sharply. The Asian markets were also higher.
While I think the Middle East/North Africa (MENA) situation will take some time to resolve, global investor sentiment appears to have adjusted to the higher oil prices and the prevailing tension that has caused oil prices to spike. I think investors have come to accept that a prolonged MENA political upheaval will be the norm for sometime. This inclines me to believe that in the coming weeks, we will be building a base of support for stock prices here.
The impressive spike in AEV yesterday, I think, is a one day event. I learned that there was one big player adjusting his large index fund to the inclusion of AEV in the MSCI Philippines. These things happen and makes holders pretty joyful. I for one am taking portfolio profits in the stock. As one of our readers had commented yesterday, you had a 17% gain over a few days, why not take the money and run. I remain in the mindset that you never lose money by taking a profit.
While I am very cautious and am keeping my eye on an index level below 3700, I realize that cheap stocks are already abounding. (Actually my thinking is that a strong support for the market in general is to form a base at 3600.) Some readers commented on stocks like MWC, JFC and AGI. I think with these stocks, it will be simply a matter of timing now because they are intrinsically solid and are at levels commensurate to their earnings forecasts. I must add that these stocks have very stable earnings even if the economy turns.
I think we are close to a point when we can cautiously position our favorites. On my part, I am likely a seller if this market moves a little higher, but because I have cash to spare, I wouldn’t mind accumulating should this market dip below 3700.
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