Making Money Alert
Could It Be a September Rally?
09/14/2006
We warned you last week about the historically tough time for equities during the month of September. Well, so far, that trend hasn't held true during 2006. Stocks have seen a pretty solid move to the upside in recent weeks, and many of the major market indices now are approaching their May highs.
Let's take a quick glance at the price movement of the S&P 500 Index during the past four months. As you can see, the index has climbed near the 1320 mark -- right about where it was in May before this latest market correction began.
While this trend is an encouraging sign for the bulls going forward, I really am not convinced that this market has the conviction to push through its previous highs and to sustain itself at those levels.
I don't want to sound pessimistic here, but in my view there is just too much risk right now for me to declare that the bull is back in town? A slowing economy, interest rates, the housing bubble, and geopolitical turmoil all still are where they were before we entered September. Those factors are not likely to fade anytime soon.
The advice I've given to my Successful Investing subscribers is to remain in cash until we see a clear change in the sentiment and performance of the major market indices. So far, we have not seen the kind of market conviction that would convince me to get back into equities. Are we close? Well, yes, but being so close just means that you have to approach your decisions with that much more caution.
Would you like to find out how the Fabian Plan can help you to determine if the current uptrend in the market is for real or whether what we're seeing right now is a fool's rally?
Click here now to position yourself for maximum profits.
OIL ETFS: A CRUDE OPPORTUNITY?
The big news in the market this past week has been the destruction in oil prices. With the exception of today's slight uptrend in oil, the past seven days have seen crude prices slide precipitously. Oil now is trading at about $64 a barrel. I know that price still sounds pretty high but when compared to the July 14 high of more than $78 a barrel, the price of crude really has tapered off in recent months.
One result of the dip in oil prices has been a corresponding sell-off in energy sector investment vehicles. Take a look at the chart of the Energy Select Sector SPDR (XLE). As you can see, this ETF has dropped off sharply in recent weeks in direct response to the dip in oil prices.
In fact, since the beginning of the month, XLE plunged right through both its 50- and 200-day moving averages. But the thing I want you to notice on this chart is the last time XLE fell to these levels.
It was mid-June and we had a similar dip in XLE. Now look at what happened in the months following that June drop. You can see that XLE vaulted to new heights. Once again, it was because of a spike in oil prices. I think what we are seeing now could be the start of another buying opportunity in energy. The sell-off in recent weeks has brought XLE and other energy sector ETFs down to very attractive levels. The trading levels are so attractive that I seriously am considering a new allocation to energy in my ETF Trader advisory service.
The table above shows just how many options there are for investors who want to play the oil game with ETFs. All of these funds now are on our radar screen, since they have been victims of the decline in crude oil.
The key benchmark, in my view, is the $60 level for crude oil. If crude can stay above this level, there is a great chance that oil prices will climb back up into the $70s. If that event happens, an energy sector ETF purchased now will be a big winner going forward. If, however, oil continues to fall below the $60, it could mean a lot more downside ahead for crude and its related ETFs.
Want to find out how we're playing the crude sell off? Click here.
FIVE YEARS LATER
It's hard to believe it's been five years since the vicious attacks of September 11, 2001. A lot has happened in the world since then, but I am not going to talk here about the external events. Rather, I want to ask you all to take a moment to reflect on the personal, emotional feelings you have about the events of that day.
Do you remember how you felt the moment you saw the greatest symbols of capitalism and freedom crumble in clouds of ash, fire and humanity?
Now I want you to take that feeling and hold on to it. Keep it with you whenever you think about the enemy this country faces. Then, and only then, will we have the will and the courage to overcome these haters of civilization.
Here's to the memory of all those who died during the attacks of 9/11, and to those who continue to put their lives on the line in the war against evil. They all have our undying gratitude for their sacrifices.
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