5 reasons stocks will end year with a bang
Market-leading growth companies show technical strength, while the dollar continues to look weak.
By Ken ShreveApple (AAPL) paid a visit to its 50-day moving average earlier this week, and just when it looked like the bottom would fall out, buyers came into the market and lifted Apple -- and the broad market -- off its lows.
The action showed that bulls remain in control for now. However, the bears haven't all gone into hibernation yet. They say weakness in the transports can't be a good thing for the market; third-quarter earnings season will be a disappointment and it's only a matter of time before Apple takes out its 50-day simple moving average with conviction.
Of course, they're all legitimate concerns, but there are plenty of other good things going on in the market right now where a glass-half-full perspective is warranted. Below are five reasons to expect a solid end of the year for the stock market:
Market leaders acting well: Bullish charts in my growth screens outnumber bearish ones by a wide margin. Every single name in the Ultimate Growth Stocks model portfolio continues to hold above support, showing little in the way of sell signals. There are plenty of broken stock charts out there, but not when it comes to the real market leaders. If the market was really in trouble here, leading growth stocks would be flashing sell signals. They're not.
Weak U.S. dollar: Not everyone likes a weak greenback but the stock market sure does. The good news for bulls is that it doesn't look like the U.S. dollar is ready to start a meaningful uptrend anytime soon. Fed policy has a lot to do with it, and the Fed's position isn't likely to change anytime soon. The dollar remains in a technical downtrend, showing poor relative price strength. It's stuck underneath its 200-day moving average at 80.71 and its 50-day moving average at 81.36. Both price levels could be resistance levels.
Meanwhile, gold tends to rise when the dollar is weak and recent price and volume trends in the SPDR Gold Trust (GLD) suggest that a breakout over its Feb. 29 intraday of $174 isn't out of the question. The fund remains under accumulation and continues to show relative price strength, holding gains nicely. On a weekly chart, GLD's 10-week moving average is $165 -- a key support level at this point.
Weak bond market: Bonds have been rallying lately, but the chart of the iShares Barclays 20+ Year Treasury Bond Fund (TLT) continues to look weak. Its 50-day moving turned out to be a resistance level in early September and it is facing resistance at the line again. With interest rates as low as they are, the case for owning bonds isn't a strong one at the moment. As a result, money could continue to flow into stocks.
Limited distribution in the major averages: Distribution is synonymous with institutional selling. When big investors start liquidating positions, it's a good time for individual investors to start raising cash. Headed into Wednesday, the S&P 500 showed four higher-volume declines since Sept. 20. Repeated higher-volume declines can stop a market rally in tracks. It can also be a precursor to more selling down the line. But two recent declines in the S&P 500 didn't feel like institutional selling at all. On Sept. 20, the S&P fell in higher volume, but it finished near its session high after early weakness and lost less than 1 point. The very next day, the S&P reversed after early strength but once again lost less than 1 point. Volume was skewed a bit by options expiration.
Institutional selling in the Nasdaq Composite has been much less prominent. The tech index shows just two higher-volume declines in recent weeks.
Bullish charts in the financial sector: Inside the Dow, financial stocks like Citigroup (C) and JPMorgan Chase (JPM) continue to set up for possible upside breakouts. Citigroup is sitting just underneath a swing point (buying area) of $35.25, its Sept. 14 intraday high. JPMorgan Chase is flirting with possible breakout over $42.09. On Tuesday, Credit Suisse raised its rating on the sector to "outperform," saying that loan growth in the third quarter could surprise to the upside. Overall, profit at S&P 500 firms is expected to fall 2.7% from a year ago but financials should be a bright spot with earnings up nearly 10% from a year ago.
In sum, there are plenty of reason to be optimistic about a solid finish to the year. While it's not out of the question that major averages will pullback, they will find support at their 50-day simple moving averages. The Nasdaq closed Wednesday at 3,135, about 75 points above its 50-day line and the S&P 500 finished at 1,451, about 36 points above its 50-day line.
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"5 Reasons Stocks Will End Year With a Bang"
The only reason the market may end the year with a "bang" is because the greedy thieves of Wall St continue their unregulated computer trades and manipulation. We continue to ignore the negative news be it a continued slumping housing market, high unemployment which is closer to 15% than the stated 8%, high inflation, declining earnings for the lower and middle class, more people slipping into poverty etc. So let the so called "experts" keep spewing forth the hype based on manipulated data and lies to give the illusion that all is well because the truth...it is not. All you need to do is look around where you live and yes...there may be a few bright spots but overall we are still mired in a recession and the continued printing of money is not the answer to our problems.
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