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Monday, June 21, 2010

Market Undercurrents Changing Fast

- As a follow up to last Friday's posting, today I have included some other companies that have significant business exposure to the state of Florida and SouthEast Region in general. No way of knowing to what extent oil floating ashore would damage this regions economy, but fears are only growing...

- I woke up this morning and heard the news about China allowing its currency to appreciate against the dollar. I immediately thought stocks of basic materials and other commoditiy stocks would rise, CLF, RTP, AA, FCX. Then I heard Meredith Whitney talk on CNBC about a possibility of a double-dip in housing slowing economic recovery in the U.S. Homebuilder stocks as reflected by SPDR S&P Homebulders ETF (XHB) have been one of the weakest sectors falling from high of $20 on April 26, to its current price of $15.92 and has shown relative weakness during the current rebound in the overall market. I quickly came to awareness that the market environment has turned 180 degrees from beginning of May.

- Throughout the market correction, fears of relative economic weakness in Europe and China with hopes of continued strength in the U.S. dominated. Now, I believe these fears and hopes are reversing, where fears of economic weakness is with the U.S. and hopes of continued economic strength is with China and other BRIC countries. As for Europe vs. U.S., equity prices have discounted the fears in Europe, I am not sure if stock prices are yet discounting the fears of U.S. economic slowdown.

-If market currents have indeed reversed, then expect to see relative strength in commodities, global industrials and global tech companies, relative weakness in retail, homebuilders, financials & stocks of companies predominantly geared towards U.S. economy.

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