The Week ahead

More feaer, no greed

I think the week ahead looks far from rosy. Every time there has been a sharp rally in the markets over the past two years, professional investors and nervous amateurs have used the chance to unload their positions. Is the late push last week any different? The markets will have to show us it is.

Almost ever weekend except the last three or four has had a story on how stocks were probably going to bounce back the week ahead. It has invariably not happened the way these rosy stories predicted.

Even last weeks very strong last two days left the NASDAQ down 1.1% for the week.

For any rally to sustain itself its going to have to last longer than two days. It's going to have to have no more revelations of corporate malfeasance (lying, stealing, theft from investors) for a couple of weeks. Are these things suddenly going to come together and start happening next week? Probably not.

For a stock market rally to sustain itself there is going to have to be credible evidence that the profit situation is actually improving. Is there evidence of that? Yes, a bit, but the numbers need to be broader before anyone believes the worst is over.

The fact remains that with the notable exception of Dell Computer, corporate spending seems to be squeezing the technology industry and squeezing it very hard. AMD cried uncle last week and lowered estimates.

Are any of these factors going to stop next week? It would be nice but don't count on it. As with most stock market turnarounds, look for something unpredictable to spark the change. The lack of a major terror attack seemed to help last week. The question is what will help next week.

Now is not the time for wild optimism. Now is the time for bargain hunting and putting a little bit of money into the market with time, good research and thoughtfulness. The most important thing is to have some more money next month when things are probably going to be cheaper still.

There are a lot of earnings reports next week, so it is possible there will be a spark. Or perhaps the explosion that lets the NASDAQ flirt with new five-year lows.

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Shmuel Protter
investmenttool.com