Bull market's final act
Despite other signs of economic stalling, a small payroll beat sets the stage for one final upswing. Yet, there are also some attractive uptrend breakouts underway.
The reality distortion field continues. On Friday, the Dow Jones Industrial Average ($INDU) surged above 15,000 for the first time on a small beat for the April payroll report (+165k jobs vs. +153k expected), while factory orders and the services ISM all disappointed and remain on a downward trajectory. Services sector activity is now at its lowest level since July 2012, while new factory orders are dropping at a pre-recession pace.
Investors, it seems, still can't be bothered with bad news -- be it deepening signs of economic stalling or deteriorating corporate profit margins. All that matters is that the cheap money from central banks is flowing. The party won't end until inflation gets out of control or the data become so bad that the ineffectiveness of extreme monetary policy easing on the real economy becomes too obvious to ignore.
But we're not there yet. And that means it's time to prepare for one last upward surge in key areas of the market that had been beaten down over the last few months, including industrial commodities, emerging market stocks and steelmakers.
First, it's worth reviewing Friday's data. Headlines are screaming that stocks are rising on a jobs "surge" -- but you'd be hard pressed to see it in the chart above.
Yet, the drop in factory orders is patently clear as shown above.
As is the slowdown in the ISM non-manufacturing activity index.
So, long-term I remain extremely skeptical of this uptrend. This is late bull market/stock bubble behavior as fundamentals are ignored, investors take more and more risk, margin debt expands and available investor cash reserves dwindle.
Yet, there are also some very attractive uptrend breakouts underway. Look at the way steelmakers, which had lost 20% of their value since peaking in January, have snapped above their multi-month downtrend channel. Same story with copper futures. Same story with emerging market stocks, especially resource sensitive areas like Russia and Australia.
In response, I'm adding the Market Vectors Russia (RSX), the iShares South Africa (EZA), AKSteel (AKS) and Mechel Steel (MTL) to my Edge Letter Sample Portfolio. I'm also closing out my short side exposure and adding a few other positions as well, including Market Vectors Brazil Small Cap (BRF).
Again, my negative long-term outlook hasn't changed. This will all end very badly, especially for older investors who are being encouraged to take too much risk in this environment. But tactically, I can't ignore the new moves underway in these key cyclical groups.
Disclosure: Anthony has recommended RSX, EZA, AKS, MTL, and BRF to his clients.
Check out Anthony's new investment newsletter, the Edge, and his money management service, Mirhaydari Capital Management. A two-week free trial has been extended to MSN Money readers. Click the link above to sign up. Mirhaydari can be contacted at firstname.lastname@example.org and followed on Twitter at @EdgeLetter. You can view his current stock picks here. Feel free to comment below.
Please, MSNBC, please FIRE Miryahdari, or is it that MSNBC does not have the guts??!!
This idiot just last week "predicted" a crash of horrific proportions within a few days, backed by his usual, useless "charts".
I just wish I could have gone on a career like this guy. 6 figure salary, and the job description?? .. just keep saying something day after day.
Anthony would have been voted out long ago.
I think he is finished...
tI am here to learn and profit.
I wonder should I do just the opposite of what Anthony said?
The stock market has its ups and downs. Sometimes (possibly a lot of times) it does not follow the market analyst's prediction.
I certainly don't think this is the "LAST" up swing of the market and I hope when Anthony talks, he needs to use common sense (and not bias view) to show people the right way to invest. Please don't ry to scare people or the other way around.
Just the fact, OK?
A stock market student
Exxon up to $89.99, Conoco up to $61.79. You gotta love today!
This is an epic wave we're on, and you can ride it for all it's worth, just keep adjusting those stop-loss points. Most set theirs at 10-15%, so if you trigger at 5%, you shouldn't have any problem getting out in time. There's also nothing wrong with starting the move out of equities here - DCA can be used just as effectively to sell as to buy.
This wild exuberance is fun to watch, but make no mistake, this is the exact same scenario we saw in the tech bubble and the housing bubble. Remember the smart ones in the 90s that sold Earthlink or AOL or Gateway and made a killing while everyone called them crazy for selling? Remember the people who sold their homes at the height of the market a few years ago? Do you want to be one of those people, or are you like a degenerate gambler, who just can resist one more spin of the wheel? Remember, Vegas has a vested interest in you sticking around and playing as long as possible. So does Wall Street. Tread carefully, my friends. The only money that counts is what's in your pockets when you walk out the door.
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