Quarterly Stock Market Market Brief & Stock Pick 

By: Christopher_Quigley

While from a classic Dow Theory position the markets are in a bear market rally, from a technical position the momentum indicators are very strong. Both the Dow Transports and the Dow Industrials, on a three day chart, have both indicated phased supportive movement with higher highs and higher lows. More significantly the increases are advancing from solid base positions which is granting the market solid technical structure, something it did not possess since the third quarter of 2008.

Given this strength the markets can readily advance another 20-30% before the issue of a new bull market is addressed. Clearly until the banking system and the real estate market is repaired there will be no new "bull" economy. What actually transpires remains to be seen. The most likely outcome is that the pure energy of momentum will propel prices forward until either the market or the economy "blinks".

It is highly likely that the price of oil, rising inflation, on-going banking problems and a collapsing dollar will bring the reality of the bear economy into focus. When that occurs there is a high probability the shorts will pound the market down, testing former lows. Please remember that the market moves down in sharper design that movement up.

Stock Pick: BP

Since we recommended BP in our last quarterly brief it has risen by 25%. However despite this run-up we continue to recommend holding this fabulous equity. With a short term momentum recovery picking up, demand for oil is bound to continue to push prices North.

BP has put its house in order. Malfunctioning refineries in the United States have been repaired and are now running normally. Fourth-quarter volume rose nearly 8% sequentially, pointing to good momentum for 2009. The assumption is that profits will perk up again in 2010 on increased petroleum usage and a stronger economy.

Spending remains accelerated. Capital expenditures are currently slated to be 90% - 100% of 2008 high water mark.

This issue offers high income at current prices. The company is very strong financially, providing a level of assurance that the strong dividend will be maintained. This top quality equity also offers attractive total return potential going out to 1012-1014.

Return On Capital:         17.5 %

PE Ratio:                          8.9

Financial Strength:         A++

Dividend Yield:               7.8%

By Christopher M. Quigley
B.Sc., M.M.I.I. Grad., M.A.
http://www.wealthbuilder.ie

Mr. Quigley is 46 years of age and holds a Batchelor Degree in Management from Trinity College/College of Commerce, Dublin and is a graduate of the Marketing Institute of Ireland. He commenced investing in the Stock Market in San Francisco, California where he lived for 6 years. Now based in Dublin, Mr. Quigley actively trades utilising the principles set out in the modules above. This Wealthbuilder course has been developed over the last 9 years as a result of research, study, experience and successful application.

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

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