I’d Love To Be Bullish, But Can’t…

| May 19, 2010 | 0 Comments

Here are some things I would love to be, but just can’t…

An international rock star…

I’d travel the world singing in front of millions.  My artistic talents would be front and center for the world to see.  My amazing musical skills would make me an international celebrity.  What a life it would be…

But I won’t be the next Lady Gaga

Why?  I sound like a cat getting a bath when I sing.  I have a singing voice only a mother could love.  My wife begs for mercy when I sing along to the radio in the car.

I’d also like to be an NFL quarterback…

I’d throw 50 yard touchdowns like it was going out of style.  I’d find my receiver and deliver a laser guided missile.  I’d take my team to the Super Bowl.  They’d retire my jersey and I would go down in team history…

But I won’t be the next Drew Brees

Why?  When I throw a football, it looks like a wounded duck flying through the air.  It’s more likely to quack than score points.  Oh yeah, my height might be a problem.  I’m just tall enough to see the belly button of the linebacker as he runs me over like a freight train.

I’d also like to be bullish on the stock market…

As much as I would like to be positive on U.S. markets… I just can’t.

There’s been plenty of time in the last year to be bullish.  Stocks have had amazing gains.  Trading with the upward trend has been very rewarding.

I’m not saying I won’t ever be bullish on the stock market again.  I just can’t be bullish right now.

Things just don’t stack up for me.  There are some big pink elephants in the room.

Now don’t get me wrong.  There are some good things happening in the economy.  We have corporate balance sheets looking better than they have in a long time.  We’re also “officially” out of the recession due to the positive GDP readings.  Recent earnings reports have been positive for the most part.

But for me, the downside risks are bigger than the upside potential at these levels…

The sovereign risks in the Euro Zone aren’t taken care of.  The recent 750 billion Euro bailout of Greece and other European countries brought calm to the markets… for a couple of days.  But the markets realized something important late last week.

The Euro Zone austerity measures will be tough.  Things aren’t going to magically go “back to normal” for Europe.

Bringing Euro Zone balance sheets back in line may cause some countries to slip back into a recession… or worse.  Greece, Spain, and Portugal (amongst others) are already struggling with high unemployment.  The new austerity measures will cause their economies to be stagnant for years to come.

But it’s the price they have to pay.  Their politicians have been overspending for years.  And now the bills are due…

Unfortunately, the only certainty coming out of Europe is more uncertainty.  The issues in the Euro Zone are far from being fixed. There are deep structural problems still to be resolved.

What other uncertainties are out there right now?

Well, the recent “flash crash” did a lot to ruin investor confidence in the market.  The recent 1,000 point plunge has put many investors on edge.  You can see it every day in the markets.  The high volatility is a sure sign of investor uncertainty.

Investors are unwilling to hold onto positions.  The slightest negative news and the markets drop on heavy volume.  Triple digit moves in either direction are now the norm.  This is quickly turning into a “trader’s market”.

The bottom line is this…

Much of the positive earnings and rebound in the U.S. economy has already been priced into the market.  In order for markets to head substantially higher, we’d need some “game changing” news.  Some-thing the market hasn’t priced in yet.

Now, don’t get me wrong.  It’s possible the markets could trade higher if the uncertainties in Europe subside for awhile.

But when the European debt issues resurface, it will be another rush for the exits.

Kind of like when I start singing…

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Category: Stocks

About the Author ()

Justin Bennett is the editor of Commodity ETF Alert, an investment advisory focused on profiting from the ebb and flow of important commodities via ETFs. The commodity veteran and options specialist is also a regular contributor to the Dynamic Wealth Report. Every week, Justin shares his thoughts with our readers on a variety of commodity-related topics. Justin is also a frequent contributor to Commodity Trading Research’s free daily e-letter. And he’s the editor of another highly successful and popular investment advisory, the Options Profit Pipeline.

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