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Dallas, TX
May 29, 2009, 08:00 EST |
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Dr. Joe Duarte's Market I.Q. |
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The Internet's Intelligence Digest
Intelligence, Market Timing, And Trading Strategy For Traders and Investors
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Seasonally Bullish Period Ahead
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What's Hot Today: |
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U.S. stock futures were again pointing to a higher opening on Friday. Overnight
Asia and Europe were higher. Oil was trading back above $64. Gold was
strengthening.
Today's Economic Calendar:
- 8:30 a.m. 1Q Preliminary GDP: Expected: -5.5%. Previous: -6.1%.
- 8:30 a.m. 1Q Corporate Profits: Previous: -28.4%.
- 9:45 a.m. May Chicago PMI: Expected: 42. Previous: 40.1.
- 10:00 a.m. End-May Reuters/U Mich Sentiment Index: Previous: 65.1.
News For Thought
Federal Reserve sanguine about rising bond yields. According to The Wall Street Journal: "Federal Reserve officials believe the recent sharp rise in yields on U.S. Treasury bonds could reflect a mending economy and a receding risk of financial catastrophe, suggesting the central bank won't rush to react -- even though some investors see danger in the government's rising cost of borrowing."
Book sales falter. The publishing industry in in a major slump. According to The New York Times: "Publishers sold 3.08 billion copies in 2008, down 1.5 percent from the 3.13 billion copies sold the previous year, according to Book Industry Trends 2009, an annual report that analyzes sales in the United States. Higher retail prices helped to lift net revenue just 1 percent, to $40.3 billion from $39.9 billion."
Army ready for North Korean conflict. According to The Hill.com: "The Army’s top military officer on Thursday said that his service would be well-prepared to fight in a conventional war against North Korea should it ever get to that."
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Seasonally Bullish Period Ahead
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Time To Evaluate Summer Strategy
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The last trading day of a new month and the first five days of a new month are traditionally bullish periods for the stock market. And as we head into this short term time frame, this is a good opportunity to see what's working and what needs changing.
The S & P 500 (SPX) closed above 900 on 5-28. That's a bullish development. Yet, what's more important is whether the S & P can move above 935, which would likely give it enough of a boost to move toward 1000.
Chart Courtesy of StockCharts.com
The energy sector led the market's rally on 5-28. We have recently added some refiner stocks to our list and are long the Oil Service HOLDRS Trust (NYSE: OIH). This is also a viable strategy that requires little but trend following and attention to detail, such as making sure sell stops are managed appropriately.
Chart Courtesy of StockCharts.com
Another important focus in energy is gasoline. There we are long the United States Gasoline ETF (NYSE: UGA). We have a nice profit already locked in and are in trend following mode there as well. Those who have missed that trade should wait for pullbacks to enter and should focus new money on any new names that are added to that list, as well as continuing to follow the OIH trade.
Chart Courtesy of StockCharts.com
Our Fallen Angels section has recently added BP (NYSE: BP), again showing our current focus on energy. Our biotech section remains very subdued as very few individual stocks meet the hybrid value/momentum criteria that we use for that section. Still, it has some open positions that are in management mode. We continue to look for stocks to add to that list, but they have not been easy to find.
Chart Courtesy of StockCharts.com
We remain short bonds via the Short Bond ETF (NYSE: TBT) and long gold (NYSE: GLD), which is clearly an inflation play. Gold has recently begun to strengthen while bond yields have been rising. That means that we should pay attention to our TBT position.
Conclusion
The next several days may give us opportunities to trade stocks on the long side. We suggest focusing on ETFs, such as SPY as core positions. If the market goes up, this fund will let you participate in the overall trend. Look to our other sections as well, as we may find other stocks to add to our lists.
Bonds, gold, and energy are still very viable areas in which to make money in this market, and offer easy access to all investors via ETFs.
For more details on ETF trading and how to improve both your own trading and your understanding of what we do and how we do it, check out "Market Timing For Dummies" and/or "Trading Futures For Dummies." See links below for more details.
Get Dr. Duarte's All NEW Books "Market Timing For Dummies." and "Trading Futures For Dummies." The Trading Manuals for All Seasons. Also Available As Kindle Books.
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Market Moves - Stock Of The Day
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General Electric (NYSE: GE) and 3-M (NYSE: MMM) Suggest Moderate Economic Growth At Best
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Chart Courtesy of StockCharts.com
Shares of industrial giants General Electric (NYSE: GE) and 3-M (NYSE: MMM) have bounced off of their lows, but are nowhere near chart patterns that suggest economic growth is near.
Chart Courtesy of StockCharts.com
GDP results, out today, may show that the U.S. economy is improving, although forecasts are for further erosion. Yet, the markets are suggesting that although the worst may be over for now, the economy is faring no better than muddling through.
GE and 3-M are huge conglomerates, whose sales, revenues, and profits usually correlate well with the overall global economy and trader perceptions of economic fundamentals. And the charts suggest that big growth is not in the cards right now.
As of 5-27, OIH was more dependent on the overall trend of the stock market, pulling back when stocks fell, rather than going along with rising crude prices.
What is good is that both stocks have bottomed, suggesting that some level of confidence has returned. Yet, the lack of a steady climb in the last two weeks suggests that doubt is creeping back in.
For GE, a move above 14 would be a good sign. For 3-M, a rally above 60 would suggest that confidence is starting to build.
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