If nothing else for people to fear about comes up, then there is always the dreaded health of banks to once again open up old wounds. Its precisely what happened Tuesday when markets took a turn for the red due to the realization that the market rallies were going faster than reality would dictate. Something I have mentioned many times in the past few weeks, its becoming more of a bigger discussion topic on how markets need to pull back and the time is ripe for September to be the right moment for it to happen. September has the worst performance historically compared to the rest of the year for long investors. I can bet that this will hold true once again.

Proof that the economy was pulling out of the worst recession in 70 years came from the Institute for Supply Management’s August manufacturing index, which grew for the first time in 19 months, mainly pushed by the government’s cash-for-clunkers program. Still with the high August sales data, auto stocks like (F) Ford were down. We all knew the auto sales would be high from the promotion, but what lies ahead for these companies? That is still the big question.

Just remember one thing, a pull back is not a reason to panic! Don’t dump stocks like last year but be cautious. Exit to protect your capital, but don’t believe people that will start saying the sky is about to fall.

Here is the market summary for Tuesday:

News to Read:
Wells Fargo plans to repay TARP money ‘shortly’ (WFC).

Take-Two posts smaller-than-expected loss (TTWO).

Is BofA ready to free itself from TARP? (BAC).

For Wednesday I will just watch the broad markets to see how much further markets begin to decline. If your holding with profits, consider how low you are willing to go before walking of to the sidelines and watch for another entry position.

Hopefully I can find a play, if the financial stocks decline further, I will ride (SKF) up for a profit on the decline of the financial sector.

Happy Investing!

Aman, MBA

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  3. Markets Rally Tuesday With More Than 1% Gains