Indexes might not be in correction territory, but they're getting closer. Now's the time to consider what moves to make.
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Here are some defensive plays for those seeking shelter in this turbulent market.
By Don Dion, TheStreet
Here are five ETFs to watch this week.
Although the wild market action has been unsettling, adopting a reactionary investment strategy isn't appropriate. Rather than trying to game every market fluctuation, long-term investors should focus on defense with a solid collection of well-balanced, diversified products.
It could have long-lasting implications not just in the currency markets but in stocks and precious metals.
By Tom Aspray, MoneyShow.com
The 14.7% drop in the shares of the SPDR Gold Trust (GLD) certainly got the market’s attention last week. It is the sharpest correction in some time, but veteran precious-metals investors are likely accustomed to the volatility. For example, in October 2008, GLD dropped by more than 28% in just three weeks, falling from a high of $99 to a low of $66.
Gold is lower again in early-Monday trading, and the CME margin hike that will take effect after Monday’s close is adding further downward pressure to both gold and silver prices.
Since the beginning of August, there have been some interesting changes in the relationship between the US dollar to gold and the S&P 500, which could have longer-term significance.
If nothing else, get a little perspective from last week's drop.
By Charles Sizemore, InvestorPlace.com
I know better than to say "I told you so" after warning of a gold bubble recently. The market gods tend to be jealous and vengeful and appear to take great pleasure in humbling the arrogant. So I know better than to tempt them.
Besides, even after last week’s bloodletting, gold still is one of the best-performing assets of 2011. The September sell-off has done little more than erase August's parabolic surge.
Still, it would only be appropriate if last week's action did mark the top. The market gods might indeed have a twisted sense of humor, and Donald Trump's high-profile blustery rant that immediately preceded the crash would have been a good opportunity for divine smite.
Nothing much good or bad is coming out of a gridlocked US. But whether Europe avoids catastrophe will determine the direction of the next 1,000 points on the Dow.
Easy. It's Europe. Here's why:
When Federal Reserve Chairman Ben Bernanke talks about significant downside risk, believe me, he's talking about significant downside risk from a collapse in Europe that might freeze credit. We don't have significant downside risk here in this country. Anyone who listens to any conference call -- whether from Nike (NKE), Oracle (ORCL), General Mills (GIS), Honeywell (HON), Norfolk Southern (NSC) or Federal Express (FDX), all of which we just heard from last week -- knows that the U.S. is pretty good. Not great but not horrible either.
What could make it horrible, though, is a sudden credit crunch in Europe that could reverberate here. I'm sure that Bernanke is also worried about all of the confusion coming out of Washington, D.C., and the inability of Congress and the president to get serious on anything, let alone job creation. But Bernanke knows that Europe is way behind us in fixing its banks and that the sovereign debt crisis is real and alarming.
So, no, we aren't the factor in this world economy.
Bearish sentiment and economic troubles continue to take their toll on the markets, but certain sectors look good and a buying opportunity may be right around the corner.
By Tom Aspray, MoneyShow.com
Even though global stock markets were able to stabilize on Friday, the sharp declines last week added to the overwhelming negative sentiment in the markets.
The technical formations prior to last week suggested that stocks were vulnerable to decline, and the short-term outlook turned more negative Tuesday.
Of course, the magnitude of the decline was a surprise to all, and Thursday's sell-off was similar to the panic selling that occurred in early August. This gave the investment firms and major banks some vindication, as they have been racing each other for weeks to cut their forecasts for the economy and lower their year-end targets for the S&P 500.
Under pressure to ease the euro debt crisis, the ECB considers some new measures.
A JPMorgan strategist says equities will soon be cheap enough to entice buyers.
By Robert Holmes, TheStreet
Investors have been told by analysts that the stock market rout is creating attractive values. But JPMorgan (JPM) U.S. equity strategist Thomas Lee, one of the most bullish analysts on Wall Street, says stocks aren't quite there yet.
Lee, in a research note today, says 53% of stocks have a price-to-earnings ratio, one of the key metrics of valuation, of less than 12 times forward earnings. By comparison, during market low in March 2009, 67% of stocks were that cheap.
"Investors have pointed to their reluctance to look at P/E valuations given concerns on earnings visibility," Lee writes in Friday's report, referring to skepticism over the accuracy of analysts' forecasts for corporate earnings. "But valuations ultimately mark lows -- stocks get cheap enough that buyers are enticed."
The site plans new features that encourage users to share, share, share -- and get some advertising in return.
"This new Facebook is so freakin' aggravating!!!!!!!" complained one user. Another chimed in with this: "What a screw-up! It was working fine before the Facebook folks 'improved it.' I will no doubt use it LESS."
Get ready, folks. More changes are coming.
Stock of the world's largest carmaker, recommended by analysts and scorned by investors, is down 44% on the year.
By Ted Reed, TheStreet
Global fears are taking their toll on many stocks that deserve better, among them those of the world's largest automobile manufacturer.
On Friday, GM (GM) shares fell below $20 for the first time, hitting $19.77 before rebounding to $20.96, up 3.5% in the early afternoon. The shares began trading in November after an initial public offering at $35 and began 2011 at $37.32. For the full year, GM shares are down 44%, while Ford (F) shares are down 42%.
Many analysts, including Efraim Levy of S&P Capital IQ, have long believed investors are not seeing GM's value.
"We think that GM is very undervalued," Levy said in an interview. "The market is overly pessimistic about future demand for vehicles."
Widespread recent selling in equities and gold looks to be a panic reaction by the masses, as opposed to a calculated response to real market data.
The over 5% decline in the Dow Industrials in the past two days has turned investors’ focus back on the downside, which is different from the positive spin that prevailed just a week ago.
From a technical standpoint, I have been making the case that the rebound from the August lows was a typical flag formation. The Nasdaq Composite has been the strongest since the August lows, but the negative signals from the McClellan Oscillator as of Tuesday’s close indicated even the Nasdaq had likely topped out.
Those who sold at the August 9 lows have had almost two months to watch the market stage a typical 50% rebound. If anyone sold yesterday because stops were hit or as a result of a previously developed plan, that is fine, but Thursday’s drop suggested many were just hitting the sell button in a panic reaction.
The bearish sentiment of individual investors jumped sharply this week, as 48% are now bearish with just 25% bullish. These numbers are as of Wednesday, so they should become more bearish by next week.
Gold was also hit hard Thursday and could be vulnerable to more panic selling before the current correction is over. By looking at the charts, we can get a better idea of what may occur so that you can develop a plan based on data, not emotion.
The computer maker's moves hint at the end of an icon.
By Jeff Reeves, InvestorPlace.com
Now the iconic iPod is an afterthought, bringing in a mere 8% of Apple revenue -- and falling fast as other gadgets take over the digital jukebox role on top of many other functions.
So could Apple pull a page out of the Netflix (NFLX) handbook and voluntarily kill off a dying segment of its business? Would it make sense for Apple to refocus rather than just run the iPod into the ground?
Treasury Secretary Tim Geithner said we would not have another Lehman-caliber meltdown on our hands. But he never said there wouldn't be pain.
Does it do any good to say that the world is on the eve of another financial crisis, as I hear so many people saying? Does it do any good to catcall me for saying that Treasury Secretary Tim Geithner was just being upbeat and hopeful when he said there will be no more Lehmans?
No and yes. No, it does not do any good to proclaim we are on the eve of the next financial crisis, because it's the degree of crisis that matters. People seem to forget that the center almost didn't hold during 2008. It was only the destruction of trillions of dollars of capital that allowed us to bottom, with a tremendous number of financial institutions in this country being wiped off the face of the earth, including many that had been with us for some time, including Bear Stearns, Lehman Bros., Merrill Lynch, Fannie Mae, Freddie Mac and three reconstituted and quasi-nationalized companies -- General Motors (GM), American International Group (AIG) and Citigroup (C).
Are we going to get that kind of crisis? That's where the second point comes in, Geithner's point. There is a grave misconception about what Geithner told me last week and what I am reading, say, in the mocking Twittersphere.
After a negative September, the financial markets could get a bounce from a news turn in the right direction.
By all indications, the post-Fed market downturn is overdone.
Stocks and other risky assets dropped early and hard Thursday morning as a flood of sell-at-open trades knocked the major averages down. The fear, if I understand the bears' reasoning correctly, is that while the Federal Reserve announced a new $400 billion Operation Twist stimulus plan Wednesday, it was accompanied by a statement that there were "significant" downside risks to the economy. Not to sound trite, but duh!
We already knew this. There were indications of trouble as far back as mid-April as inflationary pressures raged. By now, the breakdown in consumer and business confidence and a slowdown in the labor market are well known. The fact that the central bank is acknowledging this -- and responding with new stimulus -- should be considered positive.
And there are plenty of other reasons that now is not the time for panic.
The former eBay chief will likely be named to lead Hewlett-Packard after the market closes. Here's why Whitman makes sense.
Are investors happy that Whitman is coming in or that HP is finally getting rid of CEO Leo Apotheker? Probably yes to both.
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