Monday, June 30, 2008

A new quarter---a short term opportunity?

In normal times in the equity markets there is the general belief that at quarter end there are buying patterns that help push up prices. For most mutual funds, pension funds, and trusts this helps push up those crucial results that get reported to shareholders and the markets. These are not normal times and no such group psychology could take hold. Even a feeble attempt on the last day withered.

Searching for hope, tomorrow those fund managers are now free to buy trash and not have it show up in any report for a month, or two, or three. There are lots beaten up and broken stocks around that will likely turn around over time but would have been no fun to explain next week. There are also stocks that had been performing well, but whose gains were desperately needed to deal with redemptions and to offset losses on the tax books. These can come back.

This short week will tell that story, as mid-July brings an earnings season that will dominate trading.

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