Good morning,
I received an email article today from a prominent CFD Derivative brokerage house warning those that are planning to buy shares in December to be careful as that there will be a 10% correction in the early 2010. He predicted that there will strong headwinds into 2010 as US increases its’ interest rates and the problems with Dubai, Spain and Greece are not fully exposed and that gold price will continue to surge. There are also many research articles reporting that the market is peaking and nice rally will end soon. Just as many are predicting that the rally is ending, there are many other articles I received that are still bullish and believe that the markets will continue its’ run into 1st quarter next year.
Who is right and which side of the fence are you on? Firstly, I am sure US will increase interest rates and USD will strengthen, making carry trades financed by USD unattractive. We all know this, but none of us know when it will happen. With the current markets still recovery, inflation is still manageable and no hint yet from the Fed, I am sure they will not increase the rates in the next quarter. Secondly, since US will only increase interest rates once recovery is assured, there will be buying opportunities for good fundamental growth stocks. The markets may correct if interest rates are increased but since the economy is back on track, good companies’ earnings will be improved and this will cause the companies’ stock prices to appreciate. If my prediction is true, than my KUTE stock selection will be very useful, since the stocks selected are fundamentally strong with good sales growth. It seems a long time ago that interest rate of 3% is acceptable in a normal economy, so while I believe there will be corrections, I am sure the few basis points increment will be fine assuming the economy has fully recovered.
US markets advanced last night after Abu Dhabi had extended USD 10 billion to help Dubai and more signs of corporate deals. The Dow ended up 0.28% to close at 10.501.05. For the selected stocks for the week, NOV gained 0.82% to closed at $44.30, DOX was up 0.07% to close at $27.16, NE gained 1.51% at $41.01, TDW closed at $44.75, up 1.29%. FCN was down 0.04% at $46.18. There were confirmation candles for NE and TDW, so did you buy?
Have a great day.
Francies Cheng
BBus MAppliedFinance
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