Double Bottom For Markets?

by The Investment U Research Team

With the amount of rejoicing that’s been creeping into the financial newscaster’s voices recently, you would think that we were somewhere in the middle of the dot-com boom.

Unfortunately, we’re not.

Now it’s only natural that the media is giddy – they’ve had months and months of negativity followed by more bad news. It’s like the first day of spring at college – you find people taking off more clothing, and celebrating more than necessary in what is – for a summer day – a very chilly day. But hope springs eternal.

Investment U has been trying to tell investors that it’s not as bad as everyone thinks for quite some time now. In fact, we’ve been prodding those on the sidelines to think about getting back into the pool. The water’s fine.

But we also want to add a word of caution to everyone’s expectations. It’s still quite chilly out; beware of a “double bottom” where the market re-tests its lows.  

After being shocked into submission (and onto sidelines), millions of Americans are just starting to feel comfortable about getting back into the market. They might be in for another shock if they market takes another leg down.

A double bottom, or bear market rally, is just that, a short-term rally in an otherwise negative market. And while our experts at Investment U see markets improving by the end of the year, what we don’t know is if we’re getting “head-faked” by our current rally.

Three weeks ago when stocks were on the bottom they looked appetizing. Right now they look expensive for being “bargains.” It doesn’t mean that there aren’t incredible values out there, but it does mean that you need to be a bit more careful about which ones you pick.

• Watch Out for Bank Stress Tests
• Stop Sitting on the Sidelines
• Wall of Worry Grows over Rally

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