Market Analysis: How High?

As usual, after having sold a stock, it continues to climb higher the next day. We’ve seen it with FVI and now with FR which closed at 3.48! I’m really bad at timing my exits. I say that knowing fully that I don’t believe it is possible to time the bottoms or the tops.  I shouldn’t complain when I sell for profit, just move on.

Monday’s trading was based on Friday’s employment numbers which came out at 162k for March. Investors love to see these numbers because it proves a recovery is taking hold. Another piece of news came out positive; the National Association of Realtors reported an increase of 8.2% in the number of people who agreed to buy a previously occupied home in February from January. The gain came partially from buyers aiming to meet a tax credit before it expires on April 30.

Oil ended the day above 86$ per barrel. We are talking an 18 months high price! This is very interesting since if oil continues its uptrend, gasoline prices might reach a level that would trigger demand destruction. This might come down the road, for now I hope to see these new prices reflect on the oil stocks in my portfolio.

Looking at the TSX graph above, it becomes evident that this is not V recovery. Investors started the week on a lot of optimism which could propel the market higher in the next few days. On the other hand, you do not need complex technical analysis to realize a simple fact by looking at the graph: the index will have to correct, it never shoots up in a straight line. Sooner or later we will see a drop, probably only a 3-5%. If this happens in April, I hope to have some reserves ready for deployment. I am confident this correction will appear, the question is when.

The plan for the week is simple: if stocks trend higher, I will be locking profits and waiting for the inevitable to happen. A couple of variables that could impact market performance this month are 1st quarter earnings starting out on the week of April 12 and one of the PIIGS stepping back into the spotlight. Good luck with your trades.

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