Sunday, August 21, 2011

Buy Some Stocks--Again

The 17% decline in the S & P 500 in about a month has gotten people's attention.  As is typically the case, individuals have responded by dumping stocks.  Withdrawals from long-term stock funds last week were the highest since the autumn of 2008, close to the market bottom (according to the Investment Company Institute).  Sentiment measures, such as the put/call ratio, also signal broad pessimism among investors.

On the other hand, corporate insiders were buying at the highest level since the market bottom of March, 2009.

Such conditions have historically been associated with at least interim market lows and the opportunity for significant capital gains.  Given the volatility of stock prices these days, I recommend using limit orders and setting pre-determined buy points for stocks based on valuation analysis--or if you choose, technical analysis.

Steve Lehman

S & P 500:  1124

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