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Stock Market Commentary & Forecasts, Financial & Economic Analysis

Welcome to Profit Confidential • Wednesday, May 23, 2012

Which Way Will the Market Breakout Go?

Wednesday, July 30th, 2008
By Mitchell Clark, B.Comm. for Profit Confidential

To sum it all up: it’s just a miserable environment for stocks right now. Talk about having an identity crisis.

I get the distinct feeling that the stock market is ready for a breakout. The problem with this is that the breakout could easily go in one of two directions. A major oil shock or the failure of a major national bank and we’ve got the makings of a huge stock market drop. Alternatively, a major pullback in oil or some robust economic data just might lift this market in a dead cat bounce. Either way, the current environment for equities is rife with problems.

One group that’s been particularly weak lately has been one of my favorites. U.S.-listed Chinese stocks are succumbing to investors’ lack of appetite for speculative investments. There are bargains galore in this sector of the market. And it’s not as if these companies are fly-by-night operations. Many that I’ve found are robust enterprises that are extremely profitable.

I think investors have to be prepared for more pain in the stock market. There is a lot of bad news already priced into equities at this time, but the economic situation in Western nations is deteriorating. Add in rising inflation and the prospect of higher interest rates and we’ve got the recipe for much more downside in equity prices.

So, as investors, we’re left looking for only the best investment opportunities the market has to offer. In addition, we’re left with a real need for strong risk management in our portfolios. I think we really need to be prepared for the fact that anything can happen to the stock market going forward. After second quarter earnings season is over, the market will be much more vulnerable. That’s just the way it is. 

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Profit Confidential AuthorMitchell is a Senior Editor at Lombardi Financial specializing in small-cap stocks. He’s the editor of a variety of popular Lombardi Financial newsletters, such as Penny Stock Reporter, Micro-Cap Stocks, and Monster Profits. Mitchell, who has been with Lombardi Financial for thirteen years, won the Jack Madden Prize in economic history and is a long-time student of equity markets. Prior to joining Lombardi, Mitchell was as a stock broker for a large investment bank. While Mitchell is not working he enjoys fly fishing, motorcycling and tending to his hobby farm.

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