Stress Test Rally Over?
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Your Daily Profit

 

May 11, 2009

 

*****Stress Test Rally

*****Obama’s Economic Numbers

*****China

 

Fellow investor,

 

The “Stress Test rally” didn’t last long. Bank stocks had a good day Friday. In fact, they had a good week. Bank of America (NYSE:BAC), for instance, went from $8.70 to $14.17, a +62.8% gain. With that type of one-week gain, it’s not too surprising that banks backed off today as investors look to take profits.

 

There’s no doubt that the major indices are extended. Some kind of pullback is on order. But Jason Cimpl, technical analyst at TradeMaster, is in “buy the dips” mode.

 

Even though prices might be extended, we are still looking at an economy and a stock market that is in recovery. And that means current levels, like 8,400 on the Dow or 1,700 on the Nasdaq, have room for upside.

 

I’ll keep you posted on what Jason’s looking at and where he thinks certain stocks are going.

 

*****As if right on cue, the Obama administration revealed its forecast that the U.S. economy will be growing at a 3.5% annualized clip by the end of the year.

 

If true, that would be great news and may underscore the suggestion that stocks remains attractively valued. But that 3.5% is also more than twice what most economists are expecting. Blue Chip Economic Indicators survey, which was released on May 10th is calling for 1.8% growth by year’s end and 3.2% next year.

 

Recall that the Treasury also used 7.9% as its “worst case scenario” for unemployment when conducting its stress tests on banks. Unemployment has already exceeded that number, and will certainly go higher before improving.

 

I understand part of the government’s role is to boost confidence in the economy, but throwing out ridiculous economic numbers isn’t going to do it. As I like to say, I might be dumb but I’m not stupid. These numbers won’t fool anyone and have the potential to subvert whatever confidence I might have. They also have the power to undercut any confidence in “official Washington” numbers over the long term.


*****If you want growth right now, there’s only one place to look: China. As a percentage of GDP, the $586 billion that China pledged for economic stimulus is unprecedented. And it’s already having an effect. China’s GDP estimates went from 6.5% to 7.5% for 2009.

 

Much of this has to do with China’s stimulus money hitting the economy. In fact, George Soros went so far as to say that Asia will be the first to find its way out of the financial crisis. It’s pretty clear that this recovery is beginning with China and spreading.

 

I hate to give Jason Cimpl two mentions today (it might go to his head) but he just finished a great special video report on a few stocks that are breakout candidates. It’s a quick video, maybe 3 minutes, outlining one of the stocks he’s uncovered, Fushi Copperweld (Nasdaq:FSIN).

 

Fushi is benefiting from China’s stimulus spending, and Jason gives you a great look at the chart and price projection that could make you good money. We made a great profit off Fushi a couple years back during the copper run-up and we’re going back to the well call Fushi.

 

There’s a report ready with the other two breakout stocks he’s uncovered, and you can get a free 30-day trial to TradeMaster Daily Stock Alerts. Here’s the link to the special video report on Fushi and the other stocks.

 

That’s it for today, I’ll talk to you tomorrow.

 

Ian Wyatt

Editor

Daily Profit

 

P.S. If you’re looking for sure and steady dividend stocks, I’ve just put together a comprehensive report on five dividend stocks that pay out nicely and have big upside potential as the recovery continues. Use this link to discover how dividend stocks can help secure your retirement and to claim your copy of the report.





Posted 05-11-2009 5:00 PM by Ian Wyatt