It’s a whole new ball game. With the dollar’s historic lows and oil breaking about $140 per barrel, it seems obvious that as investors, we need to revisit the basic rules when it comes to risk protection and price targets. As we saw with last week’s romp on the market, the broad-based sell off was a signal that we may have finally approached the proverbial straw that broke the market's back. What is next and will oil finally come down from the stratosphere? (see Oil index set to fall?)
Whether it’s transportation costs or materials that make up the basis of the manufacturing process, companies are going to need to be looking for cost-cutting strategies in order to maintain profitability.
Unless you have a portfolio chock full of short positions and maybe a smattering of energy-related stocks, you have had a lot to be worried about. The most troubling part of this earnings season is that we have not seen a more publicized account showing that companies are having a difficult time reaching lowered estimates. Perhaps it is time to reflect on goals and pay attention to downside risk in an environment that is showing a much greater potential for breakdown that a breakout.
Next week should be interesting as we see the earnings releases from these select companies.
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