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I'm having a difficult time understanding this market.
Despite record high oil prices, a sluggish to weak dollar, growing unemployment, rising inflation and declining consumer confidence, stocks have put together a relatively impressive recovery rally. You can't point to earnings either, as the numbers haven't been that good. Better than feared, maybe, but in the end that shouldn't be good enough to drive the market steadily higher.
What I'm left with is a growing sensation that the other shoe is about to drop. We've squeezed the shorts and recaptured much of what we lost, but given the weak volume on the gains and the soft underpinnings, I suspect a decline is around the corner.
I don't have any idea what will trigger that decline, but the fundamentals just don't support current prices.
With that as a backdrop, I want to execute two trades.
First, I'll sell all Nvidia (NVDA, news, msgs) shares at today's open.
I've enjoyed a nice run on the stock in a short period, and it's bumping against substantial overhead resistance. Instead of waiting through the consolidation phase, I'll just take my profits now.
In the long term, I still like the company, but seasonal factors and technical indicators suggest it could take time for story to run its course, and I don't have lots of time in the Lab.
Second, I'll add 300 shares of Disney (DIS, news, msgs). The company stands to benefit from the weak dollar, a solid summer movie season, the continued success of the Hannah Montana and Jonas Brothers franchises, and discounted valuations. Relative to the market, the stock hasn't been a true dog, but relative to its historic norms, the stock is trading at levels not seen in a decade.
On a final note, I enjoyed meeting my fellow contestants at last week's Money Show in Las Vegas -- a good group of guys that really have lots to offer all of you. Special thanks to Ron Prichard and the rest of the MSN Money gang for hosting the Lab panel.
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