Stock Investing: Your Trading Plan for Next Week…

| June 24, 2011 | 0 Comments

Greek debt problems have been a major source of concern in recent weeks.  And investors used these worries as an excuse to book profits, sending the markets lower.

But with the S&P 500 dropping 7.3% since early May, investors were looking for a reason to jump back into stocks this week.

And they got a reason to buy on Tuesday…

A highly important vote in Greek Parliament had investors pressing the buy button.  The Greek Prime Minister narrowly survived a confidence vote.

Why was this vote so bullish?

In a nutshell, the vote of confidence means Greece can kick their debt problems a bit further down the road.  And that means some of Greece’s near-term debt fires are likely extinguished.

But don’t get too comfortable- Greece isn’t out of the woods just yet. You can expect the debt issues to resurface at some point.  But for now, it looks like an imminent Greek debt default is off the table.  And that has investors breathing a big sigh of relief.

Technical support levels are also giving the market a boost…    

As you can see, the Nasdaq was trading at two very important technical levels before buyers stepped in.  The Japan nuclear crisis lows at 2,620 (green line) and the 200-day moving average (gray line) both came into play.

Investors naturally stepped in and bought those levels…

The Nasdaq is leading the market rally with a 2.7% rise this week.  The S&P 500 is following with a 0.9% gain since last Friday’s close.

What’s in store for next week?

The U.S. Department of Commerce releases Personal Income and Outlays on Monday morning.  This monthly report gives the market a glimpse of the state of the US consumer.

Consumer spending greases the wheels of the economy, so this report is important.  The market wants to see a rise in May’s income and outlays. A weaker than expected number would be a catalyst for investors to sell stocks.

We also have Pending Home Sales crossing the wires on Wednesday…

Last month’s numbers were horrible with April existing homes sales dropping 11.6%.  That’s a steep dive pointing to continued weakness in the already depressed housing market.

However, if next week’s report shows a sign of improvement (or stabilization), the stock market will react positively.  Pending home sales is an important number, and any sniff of strength in housing will send stocks soaring!

But the most important data comes Friday…

The monthly ISM Manufacturing Index report shows the activity of purchasing managers across the US.  A strong reading indicates a healthy manufacturing sector.

But investors are wary of this month’s report…

Last month’s reading came in much lower than expected.  If manufacturing numbers continue to slide, you can bet your bottom dollar investors are going to sell stocks.

However, last month’s weak readings could have been a fluke.

In other words, the earthquake in Japan may have had a larger impact on the US economy than economists first thought.  Since the earthquake was a one-time event (hopefully), manufacturing may strengthen in coming months.

If that’s the case, we could have a major rally on our hands!

What should you do?

Look for buying opportunities in oversold big cap stocks on Monday.

The market has already factored in a lot of negative news.  As long as Personal Income and Outlays aren’t wildly disappointing, the markets will likely strengthen next week.

What stocks should you be looking at?

Intel (INTC), Home Depot (HD), and Caterpillar (CAT) are examples of high-quality stocks trading near multi-month lows.  These large-caps and many others could get a nice rally next week.

As far as housing goes…

Investors are already expecting the worst from housing.  So staying long through the Pending Home Sales number is relatively safe.

However, as next week comes to a close, consider lightening up your portfolio.  Thursday’s ISM Manufacturing report will move the market. If data continues to weaken, stocks could reverse course and move lower.

I don’t know about you, but I’m looking forward to another wild week in the markets!

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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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