Amazing Video on Stock Market Holidays 2008.

December 23, 2008-The Master Pattern

Hope you enjoyed that video. Here is some Interesting Reading.

Michael’s Immediate-term and Long-term Outlook for Stocks

The Dow Jones Industrial Average will start Tuesday (it is a holiday in the U.S. today), down 291 points or 2.9% for 2010. There are obviously two short-term camps out there: those who believe the market is correcting from the rally that started in March 2009, and those who believe the rally is actually over.

While time will give us the answer, here are some important market observations for my readers.

It was one month ago that the Dow Jones Industrials hit an intraday recovery high of 11,258. The Dow Jones travelled up 72% since March 2009 to reach that new recovery high. After a gain of 72%, it was only a matter of time before the needed correction took place.

Looking at different market indicators, we can see that the monetary policy currently presiding in the U.S. remains extremely generous. Businesses are returning to profitability, corporate earnings reports  (for the most part) have surprised on the upside. The stock market, as measured by the Dow Jones Industrials, lost about 10% in May. A bounce from this sell-off is well warranted.

On the bearish side, we still have banks dealing with this real estate blow-up. These banks are not lending like they once used to, hence it has been slow for business to pick up. Interest rates will have to go up soon. Debt at both the government and consumer levels is a huge hindrance to real growth.

Technically, it looks as if the stock market is creating the right shoulder of a huge head-and-shoulder pattern, which almost always leads to lower stock prices.

Hence, my opinion is that, in the immediate term, the market has room left to move higher. Call it a continuation of the bear market rally that started in March 2009, call it a rebound from the recent May sell-off, call it the bear needing to bring more suckers back into stocks: in the immediate term, this bear market rally has steam left.

In the long term, it is the opposite story. Interest rates have completed a 30-year down cycle. There is a good chance that the Bank of Canada will be the first Western central bank to raise interest rates tomorrow, the ballooning U.S. debt will eventually cripple us, housing is still a big problem, and inflation could be a huge problem. Longer-term, I see still see the market testing the lows of March 2009.

Michael’s Personal Notes:

Happy Memorial Day to all our American readers, and happy Spring Bank Holiday to our U.K. readers. Enjoy the day, get some rest and enjoy the weather. You’ll need the energy to deal with this tricky stock market.

What He Said:

“Bonds could now be a buy: bonds rise in price when interest rates fall as their return makes them more valuable. After a bear market in bonds that has lasted for months, the action in the bond market, as I read it, indicates that the bear market in bonds could be over. I’ve always preferred quality when buying bonds, going with government bonds over corporate bonds. If you have some cash lying around, bonds could be a great deal.” Michael Lombardi in PROFIT CONFIDENTIAL, July 24, 2006. Government bonds were one of the best performing investments from mid-2006 to late 2008, because they rose in price sharply, as the Fed reduced interest rates back to one percent in October 2008.

For more information, visit www.profitfconfidential.com

About the Author

Michael Lombardi, MBA bought his first stock when he was 17 years old. He quickly saw $2,000 of savings from summer jobs turn into $1,000. Determined not to lose money again on a stock, Michael started researching the market intensely, reading every book he could find on the topic and taking every course he could afford. It didn’t take long for Michael to start making money with stocks, and that led Michael to launch a newsletter on the stock market. Today, Michael only employs the top market analysts and editors. Some of our recommendations have posted gains in excess of 500%! Michael has authored and published over one thousand articles on investment and money management. Along the way to building Lombardi Publishing Corporation, now with over one million customers in 141 countries, Michael became an active investor in real estate, art, precious metals and various businesses. Readers of the daily Profit Confidential e-letter are offered the benefit of the expertise Michael has gained in these sectors. Michael believes in successful stock picking as an important wealth accumulation tool. Married with two children, Michael received his Chartered Financial Planner designation from the Financial Planners Standards Council of Canada and his MBA from the Graduate Business School, Heriot-Watt University, Edinburgh, Scotland.

While you are here …

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