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tdp2664 InvestorPlace A week has passed since the stock market formed its panicky intraday low on Aug. 9. What can we say about the rebound since? So far, I would have to grade it a “B” from a technical standpoint. We’ve had three sessions (Aug. 9, 11 and 15) with lopsided breadth and volume favoring the bulls. However, the actual progress made, in terms of percentage gains, still looks rather pale compared with the previous losses. In the next couple of days, the market will show more of this hand. If we get a sharp rally either today or Thursday, the overall pattern will suggest a brisk recovery in the weeks ahead, perhaps taking the S&P 500 all the way back to 1,300 (or even a little higher) during Q4. By the same token, muddled trading during the next few days — or worse, a deep setback — would imply that the bottoming process might drag on into September or October. Not what we’re hoping for, obviously, but we’ll have to play the cards we’re dealt. As long-term investors, the big question on our minds is whether the market (from here) has more room on the upside or the downside in the coming year. At this point, with the S&P off 12.5% from its April peak, the odds would appear to favor the upside. Corporate profits continue, for the most part, to display excellent growth. What’s more, at 12 times estimated operating earnings for 2011, the S&P 500 index hardly carries a demanding price tag. But we can’t afford to be complacent. While yesterday’s robust report on July industrial production (up 0.9% for the month, on top of a 0.4% increase in June) shows that America’s factories still are rolling along, new orders could slow dramatically if governments on both sides of the Atlantic don’t restore some confidence in their fiscal management soon. For now, my advice is to hang on tight to your stocks and mutual funds. Don’t unload weak names into a weak market. However, I would be stingy and selective with new purchases until we get a little more visibility
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