Looks like a change of heart today with a shot at a DJIA gain of 110 points by 10 oclock. Near-term resistance is DJIA: 9,815 (S&P 500: 1039 )

Brooksie’s Daily Stock Market blog
-an edge before the market opens
Tuesday, July n6, 2010 9:24 am EDT

DJIA: 9686.48
S&P 500: 1022.58
Nasdaq Comp.: 2091.74
Russell 2000: 598.97

Just because the rate of economic growth is slowing, does not mean it will stop and begin to decline. However, a 16% decline in the S&P 500 in the 17 weeks since April 26 seemed to suggest otherwise.

Was the abrupt decline signaling a double-dip recession, or was it primarily technical after a bull market surge between March 9, 2009 and April 26, 2010 of DJIA (+76% ), S&P 500 (+83% ), Nasdaq Comp. (+100% ), and Russell 2000 ( + 118% ) ?

Too early to tell. Looks to me as if the worry about a double-dip is very real; I don’t feel it is justified. Too many analysts expected a slowdown.I think the BIG money likes these prices.

According to Bloomberg, analysts have been raising estimates for earnings for companies in the S&P 500 to a 34% increase in 2010. In March, they saw a gain of 27%. The S&P 500 currently sells at 12.5 times earnings.

Two considerations deserve serious consideration at this time, not new to readers here, but nevertheless key.

1-We are talking about U.S. companies. In so many cases, these are viable entities, providing a service or products that are needed or desired by a population in the U.S. alone, that is 85% -to 90% employed. With the worst of the recession behind them, they are now mean and lean with a chance to be increasingly profitable as the economic recovery begins to accelerate.

How attractive are they as an investment ?

I think damn attractive vs the alternative, investing in CDs, money markets, T-bills, or longer term bonds, which will tank when interest rates eventually rise.

2-Money managers are paid to buy stocks. Fine. If they sit on cash, and the market declines, they have done a great job. Nothing beats preservation of capital. But they are competing for clients, ergo they must buy stocks at some point.

Then there are hedge funds where managers get a piece of the action, which could be as much as 20% of the profits. Then there are the “quants,” whose algorithms will probably say buy often enough to generate some upside.

Today suggests these forces are being mustered.

Notebook: Just because a recent buy or sell looks brilliant, think twice about taking bows in public for your action. As the market was plunging, Traxis Partners’ Barton Biggs publicly announced he had sold half his stock holdings in late June. Today the market is rebounding. Should it soar in face of impressive earnings reports, which get kicked off with Alcoa July 12, he may not look so clever. Don’t tell anyone, no need to know, or wait until it can’t possibly spin around and kick you where it hurts.

George Brooks
sensiblesleuth@gmail.com