Chris Lau - Seeking Alpha

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Tuesday, July 29, 2008

Oil Prices is the Key to Stock Market Recovery (Part 2)

In short, I was wrong to some extent in my last post to some extent that the housing market is the key to your growth mutual funds rising from the ashes. It is only one component of the recovery. Still, the health of real estate will have a direct impact on the financial sector. On that note, real estate is very illiquid. As a result, things will take a...very...long...time (at least until 2009, if not 2010) to play out from the perspective of establishing support levels and even being bullish once again. Let's not get ahead of ourselves for now.

The more immediate imaginary key to the recovery in the stock market is the price of oil. As I had maintained in several of my entries, oil prices have been correcting. Unfortunately, oil only has about an additional -12% to the downside before it either finds support or trades lower. That means that the rally we are about to see might be short-lived.

I really don't like short-term trading, despite analyzing technical charts for short-term profits. My style is still buy and hold, and hold forever, but in today's market, the weak global economic health and weak stocks would mean that the sophisticated investor ought to participate in shorter-term trades to enhance returns.

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