A short-term trading opportunity — not

  • July 10, 2006
  • Peter Navarro

During the three years or so that I’ve been doing this
newsletter, I’ve rarely gotten the market direction so wrong. All the technical
signs last week pointed to a summer rally. Fundamentals wound up, however,
handing those technical signs their head on a bearish platter. Glad I’m mostly
in cash and holding just a few biotech positions — which only took a glancing
blow.

What now? Well, the economy is slowing along with job formation. The housing
sector continues to fall into the dumper as residential home builders begin to
slash their work forces. Oil prices are stubbornly high. The start of the
earning season suggests there is going to be quite of bit of missed earnings and
downward revisions to company forecasts. The dollar remains in a weakened
condition. Shall I go on?

No need really. My advice, at least to myself, is to hunker down for the long
hot summer mostly in cash while I sit on a few long term buy and holds like EPIX
and VITA. That’s the strategy for July as The Well-Timed Strategy crew takes our
summer hiatus. If you absolutely, positively need to make money, feel free to
deviant from that strategy. On the other hand, this is the best time of the year
to take some time off from the market as volatility and volume both usually are
low.

This Week’s Market Movers — No Xmas Cheer this Earnings Season?

It’s a relatively light calendar for economic reports. Of the bunch, the trade
report on Wednesday has the most market moving potential. The large trade
deficit continues to weigh on the markets via the inflationary dynamics of a
weak dollar and the collateral need for higher interest rates by the Fed to prop
it up.

That said, there’s a whole bowling alley full of earnings reports rolling down
the lanes. Alcoa
(
AA |
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PowerRating) on Monday, Pepsi
(
PEP |
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(
GCI |
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on Wednesday, and GE
(
GE |
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PowerRating) on Friday, just to name a few. This earnings season
is likely to be the most important in several years. Weak numbers and downwardly
revised guidance is a likely theme and the markets will HATE that.

Peter Navarro is a business professor
at the University of California and the author of the best-selling investment
book “If
It’s Raining in Brazil, Buy Starbucks.” His latest book is “The
Well-Timed Strategy.”