Cisco preannounced a significant shortfall and yet the stock held steady. Selected Blue Chip stocks, such as GE, came in slightly better than anticipated. This occurrence began the shift in sentiment from positively pessimistic to luke warm. Then, on Wednesday, April 18, the Fed announced a reduction in the Fed Funds Rate during market hours, and the averages moved sharply higher. The most encouraging aspect to this is that the averages, as of this writing, have held the majority of their gains.
Selectivity is crucial.
Earnings growth estimates in many sectors continues to be reduced. Job cuts have been mounting. Visibility of sales growth beyond a few weeks has been difficult to gauge. Inventories have begun to be reduced. When I scour research reports for ideas, I am going to concentrate on stocks with strong earnings now, an earnings per share growth rate of double digits, and a low PE, i.e., below 20, or possibly 25.