Bill Baruch, president and founder of Blue Line Futures, previews E-mini S&P, Gold, Crude market...
Finding the Good News
03/05/2012 8:00 am EST
Looking for news that can push stocks even higher is how MoneyShow’s Jim Jubak suggests that you prepare yourself for the week ahead.
For the week ahead, look for reasons for the market to go higher.
I think this is what you should be looking for, whether you’re bullish or bearish, because with the S&P and the Dow both at relatively highs for the recent period—stretching back through last April, for example. The question is what will drive it further from here.
I think a lot of the good news is already in it. So you’re really looking around and saying OK, what is out there that’s not in this price that could make stocks go higher?
For example, if you think that there are still substantial worries about the Greek debt deal and the Euro debt crisis and there’s some resolution of that that’s greater than where we are now, that would be reason to think the market is going higher.
I don’t see this, so I think the market in fact is over-optimistic about what’s been accomplished. But if you think there’s some residual doubt there that could get resolved by the action of the next few months, that would be reason for the market to go higher.
If you think the market believes…well we had a revised fourth-quarter GDP reading from the US that came in at 3%. If you think that the market is going to go higher than that because it’s looking for more, we’re going to see more when we get our next read on the first quarter.
We get our first read on the first-quarter GDP around March 9. If you think it’s going to be higher than 3% and you think the market doesn’t really expect it to be higher than 3%, that will be reason for stocks to move up. Those are the kinds of things you’re looking for.
The last one I think you might be looking for (the last one on my short list) is something out of China, either an interest-rate cut (I think that’s off more like June or July) or some signs that China has agreed upon a course of monetary easing that logically leads to an interest-rate cut in June or July. If you see that, and you think it’s not already in the market (I don’t that one is in the market), then you’d have a reason for thinking that stocks are going to move up.
What you’re doing right now is really not so much saying, "I’m optimistic" or "I’m pessimistic." You’re trying to make it go down a level than that and say OK, what out there in the news flow would make the market more optimistic or pessimistic than it is? We’re only looking at the upside right now.
I think the market, as they say, wants to go up if it has some reason to do so. But it can just sit here for a long time, as well as going down if there is something unexpected. What I’m urging you to do right now to try to figure out where the market is going by looking for things that might make you more willing to buy stocks that might be in the news flow.
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