It's 2008 And The "R" Word Is "In" On Wall Street!

IT'S BARELY THE new year, and already conventional wisdom seems to be shifting under many feet on Wall Street. This year, the conventional wisdom doesn't seem to have much conviction. Investors are still shaken by the real estate, mortgage and credit crises which dampened 2007 and continue to roil markets this year.

Just a couple of weeks ago, with revelers ringing in the new year, many pundits were saying there would and wouldn't be a recession in 2008.

Then stocks went into a nose dive, with the Dow Jones Industrial Average plunging more than -800 points from December 31, 2007 through January 9, 2008. The catalyst for this specific reactive stock market down pull, is based on on the latest figures illustrating a sharp drop in employment. This, is a fact and a significant piece of data which needs to be seriously considered for re-aligning any stock portfolio (unlike the millions of other useless shock-headlines derived by the financial talking heads speculating tea leaves). Furthermore, the Dow Jones Averages are now testing support levels and only the markets will advise us if we go lower from here. (See Chart)

So let's cut through the chase ... what is a small stock investor to do in 2008?

Solely based on the essence of this blog, the answer is no different than what has been done for 2007; That is to, "Follow The Big Money Trend".

Based on the facts, we know this:

(1) Oil and commodity prices remain sky high.

(2) Dow Stocks with maximum exposure overseas will do well
Yes, that is the fact. Emerging markets have de-coupled from the U.S. and won't be affected as much by a slowing U.S. economy. Most are now at record multiples compared to U.S. and European stocks. This disparity will not persist indefinitely.

(3) Defensive sectors like consumer durables and health care will outperform growth sectors such as technology and manufacturing.

Especially during the first half of the year. But as interest rate cuts begin to be felt, one can expect technology and even battered financial shares will rebound by the end of the year and at some point, will offer compelling opportunities.

(4) The real estate collapse will stabilize, and overall markets will begin to improve.
(But when? The answer is, "No one knows!" ... and without the facts, we're not going there!)
However, we can agree prices won't fall forever - Like everything else in the financial world, real estate "booms and busts" are clearly trends and always cyclical. Until we see some hard evidence a recovery is underway, only then would it be prudent to speculate with the odds in our favor, period. (... umm, Our crystal ball says it could be this year, 2009 or in 2015!)

(5) The current "Big Money Trend" for individual Dow 30 stocks is as follows:

All are in a "DOWN" Trend, with the exception of the following still maintaining an "UP" Trend and still considered a "BUY":

KO

MO

MRK

PFE

WMT

*** The Following Stocks BEGAN their DOWN Trend in Our DJTP and Are a SELL ***

INTC

MCD
PG