Market manipulators miss the opportunity on the pullback because it is difficult to estimate how far the pullback will stretch as there is no panic selling. Once the bottom attracts bargain buyers, market may rebound strongly. The associated risk in short selling this market may be high.
It appears that some hot money have already begun to buy stocks incrementally. Individual investors are watching closely for symptom of market bottoming as an opportunity to replenish the thin portfolio.
Trader speculation will drive market to find support. Once market stabilizes, liquidity will move market back to uptrend as the demand for wealth assets continues to grow.
Hedge Funds Cut Wagers as Fed Signals Less Stimulus: Commodities
Hedge funds reduced bullish bets on commodities for a second consecutive week as the Federal Reserve signaled it may refrain from more monetary stimulus, increasing concern that growth will slow and curb demand for raw materials.
"The market is addicted to stimulus," said Jeffrey Sica, the Morristown, New Jersey-based president of SICA Wealth Management who helps oversee $1 billion of assets. "This market has risen because of the liquidity push and the market will decline when it's deprived of liquidity."
Report: Sony to cut 10,000 jobs worldwide
The Nikkei business daily and other media said Sony's decision to slash 6 percent of its work force comes as it struggles with weak TV sales and swelling losses.
Should You Be Buying the Dip or Taking Profits?
"Be careful what you wish for" the old saying goes, "because you just might get it." That now what? scenario is exactly the situation facing investors today, as the market appears set to deliver the most sought-after sell-off in years. Prior to today's trade, the S&P 500 has fallen the past three sessions and has shed 1% since the FOMC meeting minutes were released at 2pm last Tuesday.
"We've been looking for something on the order of 3-5%, but would not be surprised to see it go 5-10%," says Mark Luschini, chief investment strategist at Janney Montgomery Scott. "Frankly it would be a healthy restoration of valuations that have gotten a bit stretched given the quarter we've had in the equity markets and we'd view it opportunistically rather than as something to fear."
As much as I am glad to hear the captain of my cruise liner is remaining calm and not about to abandon ship, there are at least a few things that trouble me about this retreat so far.
First, it's been the on-demand dip and markets rarely deliver what everyone wants or expects.
Second, the downside has been way too orderly so far, and that scares me, because we all know that it takes a whole lot more than a 0.7% slide to put the fear of God into investors again. A couple of 300 or 400 or 500 point, single-day, plunges in the Dow might do the trick.
Finally, 2011 is still fresh in our minds, where April turned out to be the starting point of a six-month, 20% hammering.
Other than that, Mrs. Lincoln, the sell-off seems to be just about perfect.
"This could also take on sort of a self-fulfilling prophecy because if we do get some carry through, investors may say, 'ah-ha, this is the correction we've been waiting for' --- and to the extent that they've been nervously long, they may actually use the opportunity to sell into it, and as a consequence, exacerbate the decline," Luschini hypothesizes.
For now, his strategy is to put together a shopping list that kicks in ''once we breach 3% or so," at which point it becomes hunting season.
The Dividend-Fund Dilemma
So far this year, $9 billion has gone into mutual funds and exchange-traded funds that focus on U.S. stocks that pay stable, high or rising dividends, estimates EPFR Global, which tracks where investors are moving their money.
All other U.S. stock funds combined have had a net outflow of $7.3 billion.
Many of the investors joining the dividend stampede appear to be motivated by the low interest rates mandated by the Federal Reserve, which have led to a yield famine among traditional income investments like bonds, certificates of deposit and money-market funds.
Others might just be chasing past performance. The 100 highest-yielding stocks in the Standard & Poor's 500-stock index outperformed the overall market by an average of eight percentage points last year, according to Birinyi Associates.
In the long run, dividend-paying stocks are slightly less risky—and more rewarding—than the equity market as a whole. In the short run, however, they can expose you to the risk of being in the wrong place at the wrong time.
The right reason to own one of these funds, says Daniel Peris, author of "The Strategic Dividend Investor" and co-manager of the Federated Strategic Value Dividend fund, is that stocks with growing cash distributions tend to be solid businesses that earn greater returns in the long run than stocks as a whole.
"I would like to think that every client who's buying a fund is buying for the right reason, but that would be naive," he says. "I acknowledge that some people, based on last year's strong returns, may be chasing past performance."
Saks CEO: How Wealthy Foreign Shoppers Help Drive Growth
One of the big themes of the past few years has been the influx of foreigners investing and spending in the U.S. As more people around the world grow wealthy, they want to live, eat, and shop like Americans. Brazilians have been snapping up condos in Miami while Russian oligarchs are falling over themselves to purchase trophy Manhattan real estate.
In recent years, industrial companies like Boeing and farmers have been among America's great exporters. It's possible that America's bountiful malls could join the ranks.
Don’t Believe the Hype About Oil and Gas Prices Peaking: Jan Stuart
As if on cue, this week has brought a series of stories -- in The Wall Street Journal, CNN, MSNBC and other major outlets -- about prospects for a near-term peak in energy prices.
But don't believe the hype about lower prices, says Jan Stuart, head of energy research at Credit Suisse, who sees "the balance of risks to the oil price as being firmly to the upside."
While West Texas Crude is down 5.6% from their February highs, there is "a real risk these oil prices will go right back up again," Stuart says. "The speculative froth, if there is any, may be coming off. The hysteria may be dissipating. But underlying supply and demand firmly shows things are tightening and should be getting tighter not looser going forward."
Critically, U.S. consumers have shown an ability to absorb gasoline prices near $4 per gallon, which Stuart attributes to an improving employment picture and rising personal income, which is up 3.6% on a year-over-year basis. "People are better able to afford to pay a little more for gas," he says.
Beyond the fundamentals of supply and demand, Stuart is not very optimistic about prospects for "peace and stability" breaking out in the Middle East.
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