Brenda Buttner and was joined by: Gary B. Smith, RealMoney.com columnist; Pat Dorsey, director of stock research at Morningstar.com; Tobin Smith, founder and chairman of ChangeWave Research; Scott Bleier, president of HybridInvestors.com; and Gregg Hymowitz, founder of EnTrust Capital.
Trading Pit
The Dow closed Friday at 8,313.13. Now that's a gain of more than 600 points in a week and a halfand that included sell-offs on Thursday and Friday.
But it's still the Dow's fourth straight losing month…and that's something we haven't seen in 20 years.
Gregg thinks now is the time to buy stocks because there is low inflation, interest rates are low and going lower, attractive valuations, and a lot of bears in the market. He did caution investors that even though stocks are at bargain prices, don't put all your money into them.
Tobin warned that there are more lows to come. However, some good quality stocks are becoming values. He advised investors to wait for these stocks to come to value prices and then buy them.
Gary B. charted the S&P 500 and said that the late rally in July was needed to get the "bull train" rolling. But there are just too many downtrend lines and resistance, which will cause the market to go sideways or pull back before heading higher.
Scott said the Dow will probably test the 8,000 level or head slightly lower.
Be that as it may, he reiterated that when quality stocks tank, it means we're very near the end of the bear market.
Pat feels like a kid in candy store because stocks are at valuations not seen for 5-6 years. He advised to buy good quality companies now and you'll be happy you bought them down the road.
Stock X-Change
In the last couple weeks you watched a lot of stocks make some big gains but then some of them lost it all. Gregg, Toby, and Scott all picked stocks about to head higher and not give back their gains.
Gregg said Reebok (RBK) is set to make a run that will last. Ever since Allen Iverson was arrested their sneakers have been flying off shelves, Nike (NKE) is having a lot of problems, and Reebok is protected from consumer problems because the company does not make big purchase items. Toby and Scott also think the stock is a good buy.
Toby picked Dow Chemical (DOW). He said the company has had lots of problems, but all their lawsuits are contained. He thinks now is the time to buy Dow Chemical because it is the perfect example of a cyclical stock (stocks that rise quickly when the economy turns up, but fall just as quick when economy turns down). And with an economic recovery in next 12 months, this is the time to buy cyclical stocks. However, Scott and Gregg do not think now is the time to buy Dow.
Scott chose Quest Diagnostics (DGX) because it fell quickly due to concerns about some acquisitions and worries that Medicare would take some of their business. He said the stock is growing and is cheap, cheap, cheap! Gregg and Toby splitGregg likes the stock, Toby does not.
Chartman
Even with the loss we had to end the week, the Dow's up more than 600 points in a short time, and Gary B. has found some new charts he likes.
First up, General Electric (GE). The Chartman's bashed GE for a while but now he likes the stock because it recently broke a downtrend that started in March. He thinks GE now needs to pull back to gather some strength, but he'd buy it anywhere in the high 20s. Pat disagreed with the Chartman because the risks easily outweigh the rewards and there is more downside than upside in its stock price.
The Chartman's the next choice was Merck (MRK). He compared its chart to GE and found the two charts are identical. In late July, Merck broke a downtrend it was in since May, and is showing some real strength. He thinks the stock is a bit extended now, but he'd buy Merck if it pulled back some. Pat also disagreed with the Chartman on this one because Merck has some key patents about to expire. Pat would not buy the stock until it fell below $40.
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