Market Spooked By Drop in Consumer Sentiment!

A volatile week with the S&P dropping 2.9% on Friday as investors got spooked by a sharp drop in Consumer Sentiment. The market finished the week with a loss of 1.2%, that on the heels of the relief rally from the prior week. Consumer Sentiment for July plunged to levels much lower than expected which does bring some cause for concern. Adding to the malaise was economic reports suggesting that the recovery may be slower than expected. Frankly neither of these two factors is a big surprise, nor should be cause for panic. Consumers will not get confident until the employment picture improves and the economy regains its footing. The economy will improve, but that recovery will be slow given how deep this recession has been. However, the market largely ignored more positive signs that for us hold more weight in predicting how the stock market will perform longer term. Second quarter earnings seasons has only just begun, but to date, the vast majority of companies reported earnings that beat expectations. Ultimately the stock market will reflect the health of corporate earnings and we see strength in this area. No doubt the bar has been lowered on expectations, but companies are delivering nonetheless. In addition to the earnings story, three other persistent overhands in the market were met with positive developments. One, BP was successful in halting the spill of oil into the gulf. This disaster has added to the negative sentiment across the country, which should now improve. Two, the Euro has begun to show strength as the markets stabilize overseas. This too has been an overhang for the market, for which encouraging signs now appear. Third, Goldman Sachs reached a financial settlement with the SEC, a positive development for Goldman, but also for financial stocks. Overall, we think the fundamentals that will drive the market higher long term are improving and moving in the right direction. The market just got spooked last week following huge prior week gains and the unexpected and disappointing consumer sentiment numbers. We do not see a double dip recession, but caution that there are still significant headwinds for the market over the near term. We think the market will continue range bound trading until the money flow into stocks begins to rise in force. Over the near term, we look for the market to continue trading between 1020 and 1100 on the S&P. We plan to be buyers on the low end and sellers at the high end, at least until the market breaks through the top of that range.

Momentum And Value (MAV Screen): Breakout Stocks To Buy!

What Stock Tips do we have? We purchased a number of new stocks last week so have dropped those from our buy list. Those purchased including Cyberonics (CYBX, Medical Equipment), Coca Cola (KOF, Beverages), and Astrazeneca (AZN, Biotechnology & Drugs). All three stocks are still excellent buys particularly after the market pullback last week. . Erie Insurance (ERIE, Insurance), Full House Resorts (FLL, Casinos & Gaming), and PAR Pharmaceutical remain on our buy list from the prior week. Each of these stocks retreated in sympathy with the market, so investors can get now get even better prices. Kulicke & Soffa was another stock we had listed. Kulicke took a significant hit last week as semiconductors came under significant pressure with this stock hit harder than most given its sharp rise over the past few months. We like Kulicke, but plan to wait and watch the stock for a bit before considering jumping in. Frankly if the stock can consolidate and create a support level at these lower prices that would represent an excellent buying opportunity. Remember, this is a volatile stock and patience is critical towards getting in at a good price. All in all, look for range bound trading in the market over the near term. Stock selection will become more important in this market. This is also a good opportunity to employ income producing strategies in the options market.

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