By: Scott Redler
At this point it’s all stock selection and timing–that’s what you do when you look for momentum moves after a huge run like we have had since March. Money is rotating into new sectors every few weeks. If you “chase” the hot sector after the move you get punished rather violently.
I expect a lot of the same going into the year-end. We will continue to trade in this upper range. Right now it’s 1,080-1,120. If we actually get above 1,120 you can see 1,140-1,150 by year-end–below 1,080 we can see 1,050-1,060.
Gold punished all the “chasers” on Friday–if someone bought into the parabolic move at any point over the last six trading sessions, they now are out of the money. We sold our gold on Wednesday at $1,210 as it met our first objective for the trade and will now look to reenter the trade.
- I would look to rebuy gold in three tiers–starting at $1,120, then $1,080 and lastly at $1,040.
- The TRADE IS NOT OVER–it’s just punishing those going after a parabolic move.
Another example is AMZN–it was a great buy at $134, but then it reversed when it hit $146 and went as low as $136 in the blink of an eye.
At this stage of the market move, you need to be very selective on your pricing and timing. Some money rotated into the banks and semis on Friday–that could be the place for the next two weeks as these sectors have lagged the upmove for the past month.
- BAC is being treated decently on its capital raise–strength in this bank could be a catalyst for further strength in the market.
I THINK THIS IS A DOLLAR BOUNCE–not a reversal to a new trend. The dollar will continue lower next year–the trade is simply too crowded in the short-run. The economy is way too fragile for the Fed to consider raising rates so quickly and the housing market remains a wreck. 24% of homeowner are now underwater and 14% are delinquent on their payments. It will take plenty of time to work through these problems. The economy is improving, but by no means are we out of the woods.
