New All Time High – Ride This Wave. Profit Taking Will Be Minimal and We Will Grind Higher

December 20, 2013

This has been a banner week. If you followed the game play you got long on the FOMC and I told you to stay long yesterday. The S&P 500 is up more than 40 points since then and you should be making great money off of this free advice. I put a lot of time into this blog and your comments are my motivation. Please share your success on Investimonials. To post a review CLICK HERE. To those of you who posted yesterday – Thank You

This week, the market surged higher after the FOMC statement. It challenged the all-time high on Wednesday and it was able to hold the gains yesterday. Quadruple witching and a strong GDP number (4.1%) pushed stocks to new highs this morning. All of the pieces are in place for a nice year-end rally.

The Senate passed the budget and Republicans seem willing to negotiate. This bodes well for a debt ceiling extension and we will hit the deadline on February 7th. Until then, the market will assume that both parties are able to find middle ground and the debt ceiling won’t spoil this year-end rally.

Tapering was announced ($10 billion) and the Fed softened the blow by reducing the jobless target rate to 6.5%. This means their zero rate interest policy (ZRIP) will be in place for at least two years. The market liked this news and the easy money policy is intact.

You might hear some concerns over liquidity in China, disregard them. This is nothing more than a seasonal issue and the PBOC is adding money to the system. China announced their 2014 target growth rate (7.5%) this week and that is much better than feared. If their economy stumbles, the government will stimulate activity and the PBOC will ease.

Growth in Japan is moderate and the BOJ continues to print money. Business confidence is at multi-year highs.

European economic growth showed some signs of life in October and that recovery seemed to fizzle. The flash PMI number released this week suggests that they are back on track. Europe has weighed on global economic growth for the last few years and any signs of improvement would reduce uncertainty. The ECB is formalizing its centralized banking authority and credit concerns are low. Europe could be the biggest catalyst the next few months if their economic recovery continues.

Domestic growth is moderate and the Fed cast a vote of confidence this week by tapering. Today’s GDP number was just another example of the better than expected reports we’ve seen the last two months. Our economy has been able to shoulder the government shutdown.

Corporations have been running lean and mean. Any uptick in demand will go straight to the bottom line. Balance sheets are strong and cash flows are at record levels. Companies are buying back shares at a record pace.

Interest rates remain low and the 10-year US Treasury yield is lower than the dividend yield on the S&P 500. Stocks are attractively valued.

Money Managers receive performance-based compensation. It is in their interest to “goose” the market into year end. Now that there is less uncertainty, they won’t be tempted to take profits. The offers will be small and even a small buyer can drive up the price of the stock. Trading volumes will subside and stocks will grind higher into year-end.

We have a breakout to new highs and the momentum is strong today.

I’ve been telling you to stay long and you are being rewarded. Focus on stocks that are in strong uptrends and are breaking through horizontal resistance.
.
.
image


Previous Bulletin

December 19, 2013

Next Bulletin

December 23, 2013
Top