Brace Yourselves

by The Investment U Research Team

It’s going to be a bumpy week.

With the prospect of General Motors (NYSE: GM) going into bankruptcy June 1, lighting up the news wires, citizens and investors alike have lots to be emotional about. From being angry about pensions to upset over executive compensation, there’s lots of fuel for this fire.

We know that emotion doesn’t always bode well for logical outcomes, but it can equate to some above average profits if you can keep your wits about you.

The market has been on a tear recently, up for 23 sessions in the longest run-up since 1933. But that doesn’t mean much. We could be primed for a pullback. Some negative earnings reports at the right time this week is all it would take to send the markets sharply downward.

When that happens, look to pick up some bargains as many companies retest lows seen last month. Unfortunately, no one knows when, or if, it’ll happen. It could be this week – it could be next month. But the point is that it won’t make any different if you’re not ready for it.

For example, Bank of America (NYSE: BAC) plummeted down to a low of $2.53 over the last 45 days – it’s already over 300% higher. When the largest of the large caps get pushed down to unreasonable lows, they’re bound to bounce back.

It’s why you need to keep an eye on the over-reactions and market emotion in the coming weeks. It spells a nice return for those who are waiting for the next major index’s stumble.

Companies mentioned in this article: GM and BAC.

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