As another hurricane enters the Gulf of Mexico, I can't help but think back at the destruction that is left in the path of a devastating storm. As is the case with most Hurricanes, warnings are posted and a predicted path is constantly being monitored and adjusted. These constant updates help the public to take steps to protect property, minimize financial loss, and get out of harms way.
Unfortunately, the stock market does not work that way. The monitoring devices available to investors to minimize financial loss are at best crude, and highly manipulated. To get the real facts, and to decipher the markets direction, one needs to look at the probabilities with the tools available.
It seems that most market guru's agree that a year end rally will begin sometime this fall. The only way I see that happening is if energy prices correct sharply. I still believe this will happen.
In this scenario, if an investor wants to hang on to energy stocks to prepare for 2006, buying Wal-Mart (WMT) at these levels makes a lot of sense. Wal-Mart stock sold off due to consumers pulling back, so its safe to assume a 10-20% rally would occur if oil prices drop. Being a discounter, Wal-Mart would probably be a better choice than higher price retailers and department stores.
As far as 2006 is concerned, insiders are dumping massive amounts of their stock in preparation for a potential recession next year. How do these people know, and who is advising them? You need to remember insiders have knowledge that is not available to the rest of us.
Company insiders have very close relationships with Wall Street firms with whom the do investment banking business. Also, insiders have their fingers on the pulse of their company's performance. These insiders are very good predictors of their company's future results. This being said, look at the numbers of the recent insider data that I have compiled.
From August 15 thru August 25th, insiders have sold a staggering $8.9 billion dollars worth of stock. In comparison, during the same period, insiders have purchased $147.5 million ( Source: Insiderscoop.com).
I have mentioned several times about putting your feet on the edge of a cliff. We can prepare, and attempt to participate in the anticipated year end rally, but this rally will more than likely mark the high's until 2007. As people along the Florida coast prepare for another Hurricane, we will also be preparing for a 2006 bear market.
