The Stock Market and Solar Market Sector Outlook

As I have said many times over the years solar stocks have a brightfuture, a very bright future. But investors have to understand a numberof things about the current stock market and solar stocks in particularin order to fully take advantage of this long-term trend.

Marketsgo up and markets go down and these moves usually occur when it isleast expected. At the present time solar stocks, the energy industryand the market in general have been in a totally amazing rally sinceearly March 2009. Unfortunately the market and solar stocks have put onthe equivalent gains two excellent years (NOT average years) in thepast 8 weeks and in my opinion this is simply not sustainable.

As I said in early March in my previous article:

"TheDow Jones Industrial Index recently recorded a twelve year low and themedia is FULL of doom and gloom. This terrible news was all over thefinancial press, accompanied by scenarios of more of the same to come.In fact, the recent survey from the American Association of IndividualInvestors (AAII) had fallen to the most bearish level in history – 70%of those surveyed felt that the direction of the market would be DOWNover the next 6 months".

Nothing is 100% for sure, as we all know. ButI think we are either at a significant bottom or very close to it.Everything is so "oversold" at this time, that I think the worst caseis that we get a significant rally in what could still be a bearmarket".

"Keep in mind that ALL the bad news outthere is in media now. We already know all the bad news. Remember thatthe stock market IS actually a discounting mechanism which looks out 6to 9 months into the future. We do not need GOOD NEWS to turn themarket around, only LESS bad news".

Well in retrospectthat was certainly prescient insight and the market took off with mostof the major indexes being up over 25% and some of the foreign marketsbeing up over 35% percent and the solar sector of the market being UP over 70% in JUST 8 WEEKS more than triple the general market indexes.

Symbol

Current Value

%Change Since 3-12-09

%Change Since 1-1-2009

AKNS

1.28

88.2

-25.5

ASTI

5.55

63.2

47.6

CSIQ

8.23

131.8

27.4

CSUN

3.39

111.8

-14.2

DSTI

0.86

-33.2

-8.4

EMKR

1.11

48

-14.6

ENER

16.41

-7.1

-34.9

ESLR

2.28

88.4

-28.5

FSLR

190.65

50.7

38.2

JASO

3.72

74.6

-14.9

LDK

9.42

133.1

-28.2

RSOL

2.28

33.3

-37.5

SOL

3.8

65.2

-13.8

SOLF

5.2

92.6

3.8

SOLR

7.22

85.6

149.8

SPIR

7.13

56.0

38.7

SPWRA

27.25

17.9

-26.4

STP

16.45

141.2

40.6

TSL

17.5

139.1

88.4

WFR

16.53

6.6

15.8

YGE

9.23

119.2

51.3

Solar Average

 

72%

12%

 

 

 

 

S&P 500

908.35

20.99

0.56

Dow Jones

8469.11

18.12

-3.5

NASDAQ

1715.92

20.32

8.81

The Solar Stock Market Sector Then and Now

Then

InMarch solar stocks had been doing terribly since the second quarter of2007. Just like the general market, we need to look a little deeper,past the media hype, and see what is actually happening with solarstocks in the market. One of the measures (tools) that I utilize whenlooking at individual stocks is their 50 day moving average and whetherthe current price is above (bullish) the 50 day average or below(bearish) the average. It is not the only way to look at stocks and maynot be the "best", but it always seems to give me an idea of which waya stock is heading in the short to medium term and when looking at aspecific market sector, what sort of condition that sector is in.

Atthat time, 3 of the 35 solar stocks I follow are ABOVE (Bullish) their50 day moving average. On the other hand 92% of the stocks (32 of 35)are BELOW (Bearish) their 50 day moving average. This clearly told methat the solar sector was deeply OVERSOLD and that while it could golower, it was probably due for at least a "technical" bounce.

Now

Atthe current time 34 of the 35 solar stocks I follow are ABOVE their 50day moving average and only one stock (DayStar Technologies – DSTI) istrading below it 50 day moving average. Even in this case, DSTI’sdecline was due to an announcement that it is basically running out ofcash and will need more financing.

This situation clearlytells me that the solar sector is approaching a condition of being veryOVERBOUGHT. It is possible that this is the dramatic of a HUGE new bullmarket for solar stocks, but as I said in the March article:

"Toput it a different way, I do not think ALL the bad news regarding thesolar sector is out yet and that there will be future negativesurprises, such as earnings disappointments (ENER earlier this week forexample), inventory write-offs, and possibly even bankruptcies. Thesolar sector will probably get carried UP when the general marketrallies, but since they will have to work out some additional problems;I do not think their rally will be sustainable".

However,I DO NOT feel that this is the case and I think there will be asignificant correction and the industry will have to digest further badnews that will be coming BEFORE it turns around and moves up in a moresustainable manner.

Numerous opportunities will come, butinvestor patience will be required to wait out this tough period andfor sector volatility to "settle" down. This is still an embryonicindustry and it is going through a painful retracement andconsolidation phase.

Rewards come to those investors who are patient and do not follow the crowd

Aspiringinvestors need to acquire and nurture patience. Historical data clearlyshows that more money is made MISSING the downside than catching theupside. As I read my e-mails from readers, I get the feeling thatpeople really want to buy solar stocks and ride them into a brightfuture. Many times I get the sense that they are afraid, that if theydelay, they will miss the chance to profit from the solar industriesbright future. This is NOT true. There will be plenty of time and manyadvances and declines in the future. Be patient, look for the strongeststocks and try not to get swept up in the crowd, because the crowd is always wrong.





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