| About | Library Welcome, Guest! | Login  
Public Books > Current News/Issues > 2011.08 Is it time to accumulate stocks? 
Is it time to buy stocks?
US stocks are at or near the lows of the year. Is it time to buy or accumulate?
Aug 2011
News Headlines
  • Gold hits latest record high, near $1,830- AP
  • Rate on 30-year mortgage falls to lowest on record- AP
  • Philly Fed factory activity plummets in August- Reuters
  • Jobless claims rise 9,000 - Reuters
  • Home sales dropped 3.5 pct. in July, hit 2011 low- AP
  • Oil falls sharply as banks cut growth forecasts- Bloomberg
  • A second Great Depression, or worse?- NYTimes
  • S&P under investigation: The backlash begins- Breakout
  • Aug 18, 2011
    Fear (VIX) Spike
    Spike in volatility indices usually signals a market bottom.
    Aug 5, 2011: VIX hit an intraday high of 39 -- one year high.
    Bad Technicals
    SPY seems to have broken recent support levels.
    Bad Seasonality
    Summer is usually not good for stocks. Wait till September to buy.
    Relative Value
    Buying when SPY is below 200 day moving average is a good relative value.
    Aug 5, 2011: SPY is 3% below 200 DMA.
    US Debt Deal
    US Debt deal may result in spending cuts and economic slow down.
    Reasonable P/E Ratio
    Company earnings have been reasonably good and current P/E ratios look reasonable.
    Aug 2011: S&P500 TTM P/E ratio is around 12.
    Panic Selling
    Indiscriminate selling usually signals a market bottom.
    Aug 5, 2011: Major averages fell ~7% within few days and the US indices are in correction territory (> 10% drop from peak).
    Negative News
    News in the media is too negative and pessimistic - double dip recession, sovereign debt problems, etc. This is usually a contrary indicator.
    Sea of Red

    For the first time in history, all 500 stocks in S&P500 index went down!

    No Panic Among Pros
    Aug 2011: Per Investors Intelligence Survey, market bulls actually rose to 47.3 percent while the bears dropped to 23.7 percent.
    Sep 7, 2011: Bear/Bull ratio is now suggesting pessimism among investors.
    Fund Outflows
    Domestic outflows, excluding ETFs, hit $9.4 billion last week, surpassing the $9.2 billion outflow during a week in October 2008 and the most since 2002.
    Aug 15, 2011