Tuesday, August 9, 2011 11:14 AM – Stocks Bounce

Was yesterday a selling climax? Stocks are up 1.7%-2.6%, depending on the index. Before our markets opened European markets turned up sharply from lower levels to finish mixed. Gold is down, which one would expect. In the last few minutes that rally has cooled somewhat, but not much so far.

This morning, I did replace a portion of what we sold yesterday with an ETF just in case yesterday was the low. I used that instead of a mutual fund due to the intense volatility right now.

Sometimes, as in 1987 and 1929 a bounce up is very sharp but only lasts a day or two before it comes back down to the prior low. Another possibility is a 3% rally that peters out and the market heads lower. We have a couple of those in the last two weeks. We’ll just have to watch things and see it unfolds.

The good news is that the market is reasonably priced at this level, only about 11 times projected earnings, though those projections could be a little high, so maybe 12 times adjusted earnings.

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