Not everybody dare to declare this year will be a great year despite the fact that Dow Jones Industrial Average has been sending many stock traders smiling from ear to ear. They may dare to say that the worst is over (unless huge bubble such as credit card debt burst) but still they’re not putting more than 50% of their monies into the equities for obvious reason. Like it or not the sentiments are bullish and that’s all that matter. The latest jobs report was good with job losses of only 247,000 versus 325,000 consenses while unemployment rate of 9.4% against consensus of 9.6%.

From the stock market point of view, the strength demonstrated by Dow Jones when it confidently climbed above 9,000-level and stays above it thereafter brought the relieve much sought after. You can call this the turning point or whatever you may wish to call it but to me, this is the event that triggered buying positions. But you shouldn’t put all your monies into the game, not to mention you should take profits off the table when your target has been achieved. However certain captain of the economy is not buying the bull story. At least not John Mauldin, president of Millennium Wave Investments, who isn’t convinced the next bull market has already begun but would rather see companies adding jobs.

Well, John has a point because although unemployment is improving people are still without jobs. At this moment we can’t tell if the quarter million of job losses will continue to improve. What if the job losses stay stagnant (neither improving nor worsening) at a later stage? Mauldin likens today’s situation to that of the bear market of the 1970s whereby the period from 1974 to 1982 was like hell – the worst may be over but the bull is still many years away. Also nobody talks about the fact that employees are earning less with lesser and lesser big time spenders. Heck, even office sex doesn’t happen as frequent as during the bullish time *grin*.

There’re also concerns about Japan’s economy – its’ debt and unemployment may trigger another round of panic selling. China is expected to surpass Japan this year as the world’s second largest economy is not doing Japan any favor either. Japan’s unemployment rate has spiked to an astonishing 5.2%, thanks to aging baby boomers – the population is expected to fall to 90 million by 2055 after peaked in 2004 at 128 million. Fortunately unlike the Westerners, Japanese have good savings hopefully be able to help them sail through the rough sea of economy uncertainties, not to mention the close family-ties which could extend the helps needed.

Nevertheless if the current bullish sentiment continues and the last lap of U.S. earnings involving retailers show strong and positive earnings, the game is not yet over and could send short-sellers scrambling to cover their positions and in the process send the stocks higher. But after weeks and months of uptrend, the time could be ripe for consolidation and this is another reason why you should take some monies off the table.

Other Articles That May Interest You …

• Are you convinced the Bull was a suckers Rally?
• Even if the Worst is Over, So What?
• Stress Test a Hoax? Another Wave of Banking Tsunami?
• Beats Earnings – Blinded by Excessive Low Expectation

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August 8th, 2009 by financetwitter

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