The Stock Market Could Go Either Way

One of my favorite companies just split its stock two-for-one. LKQ Corporation (NASDAQ/LKQX) operates in the auto parts business, which, I have to admit, is a somewhat unexciting and mature industry.

It doesn’t really matter in this particular case — the stock doubled this year.

Another company that continues to be an outstanding wealth- creator for stockholders is an old favorite, New Oriental Education & Technology Group, Inc. (NYSE/EDU). This stock is up over threefold since I first came across this company. There’s no doubt it is expensively priced, but it is likely to remain expensively priced, as investors continue to put money into well-managed China growth stocks.

As I wrote previously, I still feel the stock market is at a crossroads right now. We are close to a turning point that could go either way.

In my experience, for the most part, stock market participants tend to be an optimistic group and they want to bet on a brighter future. Sentiment is quite fragile right now and I firmly believe that it’s equally probable that the stock market will either resume its downtrend or develop a new, more positive trend going into the New Year.

What I don’t expect is any runaway market for stock prices in either direction. I think this is a view held by many on Wall Street.

The Dow Jones Transportation Average, which is always an important benchmark, doesn’t look too healthy in this market. A quick look at this index reveals that its most recent trading action is virtually identical to its performance in mid-2006.

One thing’s for certain, there is precious little time left for the important benchmarks in the marketplace. Either we get a reversal soon, or we might get a much worse breakdown in stock prices.