By: Scott Redler
Last time I was “On the Call” we were in the midst of a 9% correction. I said GET EXCITED: buy the dip at around 1,040 in the S&P. We hit 1,044 and that was it. Our thesis for this year has been to buy dips and be bullish on opportunities to buy stocks that look to be breaking out of great patterns. I am a market timer and I look to TIME THIS MARKET.
A slow “Tortoise Market” is a GREAT setup for market timers. You can see where the action is and add investments to areas that are working. There is very healthy rotation going on in this market and it is very trade-able.
First, the Russell 2000 broke out, then the NASDAQ, which is good. The market is best when led by innovation, small caps and growth areas. Next, the S&P broke out, and finally yesterday the Dow joined the party and broke its January highs.
People say where’s the volume???? I say this is a different market. A lot fewer hedge funds, fewer brokers and fewer investors. On February 5th, the day the market reversed, we saw BIG volume. There have been many high volume breakouts as well, so it doesn’t really matter that the overall market isn’t trading with robust volume. We will probably see “volume” on the day that everyone gets excited and that will be our short-term top.
We’ve been long Apple (AAPL), Amazon (AMZN), Intel (INTC), Cree (CREE), VM Ware (VMW), JP Morgan (JPM), Bank of America (BAC) and Las Vegas Sands (LVS). We’ve been trading these from a net bullish stance and adding and taking off based on the right price patterns. The key point is that we’ve been net long all of them and they can still go higher!
I am long gold and think that gold has some consolidation to do now that the market made its move. Attention will be back here now, and gold can even exceed the December highs.
The S&P can see 1,230-1,250 this year, but we still need to manage our positions through the year. The Dow could see 11,200-11,500, and the Nasdaq 2,500-2,600.
There are however some risks, WASHINGTON being the biggest:
- Bloated pension systems need reform.
- Excessive entitlements that Washington thinks are deserved have to go.
- The health care bill and how house Democrats are shoving it down America’s throat is a huge risk.
- President Obama’s WEAK stance on ISRAEL is just wrong–he should be backing Israel with some back bone.
- And lastly, the President better be very careful with CHINA. If he thinks calling China a currency manipulator is a “good idea” then he doesn’t know what a good idea is.