Modest Decline Following Friday Recovery!

The market lost ground again last week, but thanks to the Friday recovery, ended with only a modest .7% decline. Concerns over housing and the economy are providing the nourishment for investor fear. Housing is bad, and some economists do not expect prices to stop falling before 2nd quarter next year. The pace of declines has slowed, but housing is still falling due to rising foreclosures and lack of demand. The economy is very weak, but has begun to grow ever so slowly as the recent GDP figure released last week suggests. In fact, it was the GDP report and Bernanke comments that provided the market that much needed lift on Friday. We continue to believe that stocks are range bound and that we are trading at the low end of that range. Stocks could go lower, but we think there is support between 1030 and 1040 on the S&P that will provide a floor on just how low stocks go over the near term. No doubt buying stocks now is challenging for risk adverse investors, but if yo u plan to hold long term, prices today will seem cheap a few years from. The economy is undoubtedly on a slow path to recovery, but that can be good for stocks once marketplace fears subside. It is those fears and pessimism that create much of the volatility seen today. Merger mania has started to heat up and that is a positive sign for stocks and the economy. HP, Dell, BHP Billiton, among others were the big names making a splash last week. This activity will continue as companies flush with cash that have been sitting on the sidelines, take advantage of lower prices to buy growth into the future. This is another sign that corporate America is in good shape, and in the end, it is corporate earnings is what will drive the stock market higher.

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

What Stock Tips do we have? We have a full list of stocks on our buy list with every stock a carryover from the prior week. EBIX (Software & Programming), Credit Acceptance Corp (CACC, Financial Services), Erie Insurance (ERIE, Insurance), Full House Resorts (FLL, Casinos & Gaming), and PAR Pharmaceutical (PRX, Biotechnology & Drugs) are all carryovers from our buy list for three weeks now. Buckeye Holdings (BGH, Oil Well Services), MV Oil Trust (MVO, Misc Financial Services), and Alliance Partners (ARLP, Coal) also remain as excellent picks. We wrote last week that EBIX had already risen significantly so investors may want to wait for a consolidation period. However, EBIX has massive short interest, and that is usually a contrarian indicator suggesting the stock could go sharply higher if the short sellers have to quickly cover. EBIX just might be worth the risk, but could be volatile over the near term. We dropped Williams Partners from our buy list as momentum has d eclined and reports this week suggest that oversupply of natural gas and low prices will continue for some time. That would likely mean that Williams Partners would decline or best case represent dead money for the next few months. We have a large number of stocks to pick from, so look to an industry or sector for portfolio diversification and pick one of those stocks. For example, if you like the energy sector or need diversification there, pick ARLP, MVO, or BGH. The market remains range bound, so buy stock on the dips and use options to produce income across the trading range. Also, now is a good time to take advantage of low prices on quality companies paying high dividends.

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