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Stock Market Commentary & Forecasts, Financial & Economic Analysis

Welcome to Profit Confidential • Tuesday, May 22, 2012

Get Ready for a Potential Spike in Stocks

Wednesday, October 1st, 2008
By George Leong, B.Comm. for Profit Confidential

It was a nasty day on Monday that reminded me of the technology melt down in 2000 and Black Monday in 1987. The selling capitulation was evident, as about 2.8 billion shares traded on the NASDAQ, but the volume was not that bad given the degree of selling. Yes, there was selling, but it was not a mass market run to the exits.

Markets are now oversold and will attract some degree of oversold buying, but until I see the bailout legislation pass, I expect trading will continue to be volatile. Should a bailout package pass, I expect to see a spike in stocks, so you may want to get ready for this.

The government and Fed have lots of work ahead of themselves. The reality is that economic growth is worrisome, even in light of the bailout strategy. Recent economic data in the housing market and manufacturing are pointing to softness. We are not only seeing economic weakness in North America, but also overseas in key economic zones, including China, Japan, Europe and India.

The current situation is not a crisis, but you get a sense that there is much more bad news down the road that will hamper the economy and the ability of stocks to move higher.

The bottom line is that there is no guarantee on the effectiveness of a bailout, as the situation appears to be much worse than we are led to expect. Again, I do not view a bailout as an invitation to jump into stocks with a vengeance, but I do advise prudence and emphasize that trading will continue to be characterized by high risk.

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Profit Confidential AuthorGeorge is a Senior Editor at Lombardi Financial, and has been involved in analyzing the stock markets for two decades where he employs both fundamental and technical analysis. His overall market timing and trading knowledge is extensive in the areas of small-cap research and option trading. George is the editor of several of Lombardi’s popular financial newsletters, including The China Letter, Special Situations, and Obscene Profits, among others. His trading advice on stocks and options is also found on his daily trading site, Daily Profits. He has written technical and fundamental columns for numerous stock market news web sites, and he is the author of Quick Wealth Options Strategy and Mastering 7 Proven Options Strategies. Prior to starting with Lombardi Financial, George was employed as a financial analyst with Globe Information Services.

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