I really want to step in and start buying some stocks here but I'm holding off because I think that might still be a tad premature. That being said, I still think that we reached the yearly lows for the markets back in August..some of the short term things I'm watching is:
- the price of gold. Gold is viewed as a safe haven from stocks so if I start to see the price of the metal decline, that would make me more constructive on stocks.
- the price of oil. The price of Oil has declined rather sharply over the past couple of months, trading down from $100+ to around $83 a barrell. As long as the price can stay low, this will help to spur consumer spending (less money to fill up the car equals more discretionary income to spend) and thus help the economy to grow.
- I'm watching to see how the financial debacle in Europe plays out. If we can get some compromise and stability, our markets will soar.
- how our bank stocks perform. If the almost relentless selloff in the financial stocks can cease, then I believe the markets will work their way back higher (it would also help if the government would drop all the growth hurting lawsuits).
When I do see some of these developments start to take place, I will again start to buy the financials as they represent the most attractive and undervalued sector of the market. For some shorter term trades, I will be looking to buy Sallie Mae (SLM), KKR Financial (KFN), and XL Capital Group (XL). All three of these stocks have the potential for short term pops if the market can stabilize. I'm going to look to be buying these stocks around the following price levels:
SLM around $12 (book value is $16)
KFN around $7.50 (9% dividend, book value is $10)
XL around $19 (stock trades from $19 - $22 quickly)
Each of these three stocks move very quickly up and down which is why I'm looking to capitalize on a quick jump up in price and take a very short term 5-7% profit.
Stay tuned...
