Are Greek Debt Issues Pushing Stocks Lower?
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  • I'm hosting an exclusive online video event, "Profiting from Crisis in Europe". Investors are scratching their heads trying to figure out how to make money in the markets with Europe's debt crisis seemingly expanding everyday. Go to http://www.100kportfolio.tv/video to find out more.

The S&P 500 is doing its best to build on the half-point rally it put together last week. All in all, there's no reason to expect stocks to reverse recent weakness and launch toward previous highs. It's better to see stock consolidate after the recent declines, and, perhaps, grind higher.

The S&P 500 is trying to take back the first resistance level at 1,280 this morning.  

I can't decide if there's actual progress being made on the Greek bailout saga, or if investors are just getting sick of the seemingly endless drama.

One thing we should keep in mind, however, is that the Greek debt problem is a minor catalyst. As we discussed yesterday, the stock market has been declining because of weak economic data and the potential for that to start affecting corporate profits and valuations.

Everything else is basically noise, even though it's sometimes interesting noise.

We've talked a lot about how oil is a near-perfect indicator of investor sentiment. When investors feel confident that the economic recovery is on track, oil prices rise. Stronger economic growth necessarily means greater demand for oil and energy.

When investors are worried that economic growth is failing, they sell oil because of expectations that demand will fall.

We've also discussed the impact of the weaker U.S. dollar on oil prices. When the dollar falls in value, it takes more of them to generate an equivalent amount of purchase power, and that translates directly into higher oil prices, too.

But the value of the dollar is also tied to growth expectations. When investors become bearish on growth, they move out of risky assets like stocks and move money into the safe haven of Treasury bonds. This activity pushes the dollar higher and oil lower.

Of course, we know that stimulus like QE2 serves the dual purpose of enhancing growth expectations and weakening the dollar. But for the net result for the dollar and oil prices is the same.

Yesterday's rebound for oil prices was a good indication that we might get some upside for stock prices today.

In addition to oil, we should also be watching shares of Apple (Nasdaq:AAPL) as an important indicator for stocks and the economy.

As a company, Apple has it all. Phenomenal revenue and profit growth, and a product development team that seems to churn out one massive hit after another.

From a valuation perspective, Apple shares are not expensive. The forward P/E is 11. But Apple is important because it's an excellent measure of investor sentiment. It's probably the most widely held stock in the world. And it's traded in a neat range between $320 and $360 for the last 7 months.

So when Apple fell below $320 yesterday, every financial media outlet sounded the alarm that Apple was breaking down.

I asked TradeMaster Daily Stock Alerts' Jason Cimpl what he thought about the "breakdown" in shares of Apple. Jason was not impressed.

"That breakdown pattern calls for another 20% drop in Apple," he told me. "Not going to happen."

And shares of Apple are up $8 today, back over that $320 level. Still, Apple (and oil) is important to watch. If it ever does breakdown from $320, that will be a bad sign.

Speaking of TradeMaster Daily Stock Alerts, Jason lead his members to 9% and 6% gains last week, despite a very volatile week. And this week, he's got his members in a trade that's already up 26%.

Jason is an exceptional trader, and always seems t know which the market is headed. And he always controls risks with stop losses and realistic price targets.

If you want to stay on top of the market's every move, and generate consistent short-term profits too, then check out TradeMaster Daily Stock Alerts.





Posted 06-21-2011 3:26 PM by Ian Wyatt
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