21
Dec
2009

What the Market Wants: Market Stuck in a Sand Trap

Last week the market (S&P 500) battled resistance at the 1100 mark as if it were in the yawning sand trap at #14 on Pebble Beach – and Tiger Woods can't help us out just now.

This battle against resistance has been going on since October 14. Since that date, except for a little dip around Thanksgiving, the S&P 500 has closed each day near the 1100 mark. The high during that period was 1119, but we ended Friday at 1102 and the week before that at 1106. This morning we reached 1117, but ended the day at 1114.

The market's lack of direction mirrors the news. Last week, the Empire State Manufacturing Survey fell 21 points, to 2.6, after four months of improvement, but the Philly Fed Index, announced on Thursday, increased from 16.7 in November to 20.4 this month; this index has remained positive for five consecutive months.

Inflation reared its ugly head early in the week, but housing starts and production numbers countered by coming in strong, with housing starts rising 8.9% in November and overall industrial production ramping up 0.8% in November. On Thursday we learned that the index of U.S. leading indicators rose for an eighth consecutive month in November, which should indicate an extension of economic growth into 2010, but initial jobless claims spoiled the party by rising 7,000 to 480,000 against all expectations. Continuing jobless claims were also up, climbing by 5,000 to 5.19 million.

The whole world seems to be stuck in the sand. The climate conference fought to a draw; the health care reform bill is struggling to survive; and even our scientists have failed to give us any clarity. Last week they announced the discovery of dark matter but said that the odds that their conclusions were correct were a little better than 50%.

Our market stats reflect the market's stalemate. Last week's best cap/style was Small-cap Value (+1.8%); the worst was Large-cap Value, (-0.25%). The three leading sectors were InformationTechnology, Energy, and Healthcare; the three lagging sectors were Materials, Telecom and Consumer Staples. But all in all, there wasn't that much difference between the top and the bottom.

Click here to see the Market Stats.

The bottom line is we don't really know where the market is going, but from Sabrient's perspective, we don't really care. We continue to look under every rock for real companies with real earnings and real cash flow and really good prices, and as long as we buy those we should do okay, especially if we've also found some really smelly companies that are overvalued that we can sell as a hedge.

4 Stock Ideas for This Market

With that in mind, I created a special search with MyStockFinder (http://MyStockFinder.com), emphasizing high value and high growth (weighting growth a little less than value), high quality of earnings and high fundamentals. Here are four stocks that appear to be real companies with real earnings and real cash flow, with really good prices.

Core-Mark Holding Company (Nasdaq: CORE) – Consumer Staples
James River Coal Company (Nasdaq: JRCC) – Energy
Reinsurance Group of America (NYSE:  RGA) – Financials
NII Holdings (Nasdaq: NIHD) – Telecom

NOTE: Barring any market-shaping event, we're going to take off next week to celebrate the holidays. Perhaps a week of rest will help clarify my thoughts-- and the market's direction.  Of course, if anything really startling happens, I'll be back at the computer to talk about it.

Happy holidays to all!

David Brown
Chief Market Strategist
Sabrient Systems, LLC
Leaders in Investment Research
http://www.sabrient.com
and  http://Twitter.com/ScottMartindale

Full disclosure:  The author does not hold any of the stocks mentioned in this week’s
“Stock Ideas."  However, NIHD and RGA are part of the Sabrient Investor's Hedge Portfolio.

Disclaimer: This newsletter is published solely for informational purposes and is not to be construed as advice or a recommendation to specific individuals. Individuals should take into account circumstances in acting on any rankings or stock selections provided by Sabrient. Sabrient makes no representations that the techniques used in its rankings or selections will result in or guarantee profits in trading. Trading involves risk, including possible loss of principal and other losses, and past performance is no indication of future results.

david / Tag: CORE, energy, healthcare, JRCC, NIHD, RGA, sectors, technology /