Waiting for the Next Buying Wave

The big news this year continues to be the strength of large-cap companies. Long-time readers of this column know that I like to follow a number of large-cap, bellwether companies so as to get a better sense of where the broader stock market might go.

All of them — GE, IBM, HPQ, DE, etc. — they’re all trading at new highs and this is no small accomplishment considering the severity of the credit crisis just a few months ago.

Clearly, with so many large-cap companies doing so well on the stock market, the probability of rising stock prices in the broader market over the near term has increased.

We just came off a fairly significant correction and I therefore don’t see any bubble in stock prices at this time. My near-term outlook for stocks has changed over the last few days. I’m definitely getting more bullish. Even if third quarter earnings aren’t that great; as long as there aren’t too many big disappointments, the stock market should be happy with the results. If we get another interest-rate reduction within the next month or so, then we could get a significant rally that lasts until year-end.

From my perspective, I haven’t been able to find really attractive new buying opportunities in this market. Back in the spring and summer, I was finding great new stocks every week. I still contend (unscientifically) that attractive, new buying opportunities in the stock market tend to occur in waves. I’m waiting and hoping for the next wave to begin soon.

Of course, you can’t predict these things. You just have to roll with the market and look for the best opportunities it has to offer. The good news is that so many stocks, particularly Chinese stocks, have done so well this year that their capital appreciation more than offsets the lack of new investing opportunities at the present time.