It's do-or-die time for the market
As stocks hit resistance from their 2012 highs, investors should be looking for additional upside progress.
While many people couldn't care less about the stock market right now as end-of-summer vacations are in full swing, there were some real fireworks to be seen Tuesday. Apple (AAPL) soaring and then crashing. Facebook (FB) collapsing. The dollar plunging. The major averages pushing over their 2012 highs early in the session before being smacked down into negative territory. And all the while, with everyone distracted, precious metals continued to launch out of a long multiyear downtrend.
With the S&P 500 perched right below its 2012 closing high, the bulls are at a decision point: Either they push over the bears' defensives at 1,420 on better economic data, signs the Germans and the Spanish are opening up to the idea of a bailout in exchange for reducing Spanish borrowing costs, and hopes of aggressive central bank intervention -- or they succumb to the market's short-term overbought condition.
I think investors should be looking for additional upside progress for three big reasons.
For one, precious metals are rallying on a combination of higher inflation expectations as well as weakness in the U.S. dollar. Both are positives for the "risk on" complex of stocks, commodities, and yes, precious metals.
Also, cyclical, economically sensitive stocks continue to power higher on a scale not seen since January. You can see this in the way financial, retail, materials, energy, and tech stocks are leading the charge while investors largely ignore consumer staples, health care, and utility stocks. That's a sign people are trying to get more exposure or "beta" to the market; and they aren't really worried about a retrenchment in overall economic growth.
And finally, on a purely technical basis, the S&P 500's directional indicator -- which was created by Welles Wilder in 1978 -- has moved into solid uptrend mode for the first time since January. Before that, uptrend modes were triggered in early and late 2010 and in the middle of 2009. All were associated with smooth, steady low-risk rallies.
I continue to recommend my readers and newsletter subscribers focus on precious metals and related mining stocks until the bulls resolve the impasse to the upside. Examples include the Velocity Shares 3x Silver (USLV), up nearly 30% since I added it in late July, and First Majestic Silver (AG), up nearly 18%.
Disclosure: Anthony has recommended USLV and AG to his newsletter subscribers.
Check out Anthony's investment advisory service The Edge. A two-week free trial has been extended to MSN Money readers. Click here to sign up. Contact Anthony at firstname.lastname@example.org and follow him on Twitter at @EdgeLetter. You can view his current stock picks here. Feel free to comment below.
Anthony... Just last Thursday your article stated "Epic Stock rally under way".
Now only 3 Stock Market days later..."it's Now Do or Die for the Market"
Your losing creditability writing such flip flopping stories.
MSN money should start proof reading what you write, because it's an absolute embarrassment to their organization.
Anthony, I enjoy your commentaries and have been generally following your logic with some buys but Ricky's comment has some validity. Just last week, you seemed to feel that the market was preparing for an epic advance...very bullish language. Now, a week later, you seem to be unsure about the epic prediction and now it seems that you are saying it is a 50-50 proposition. Please explain so I better understand your logic as I wish to feel comfortable with your opinions now and in the future.
What market short are you talking about? My positions are all longs.
@Active RIA ...Did you even bother to read Anthony's article he posted last Thursday?
He didn't mention anything about being nimble or flexible in these trying times......He said a "EPIC STOCK RALLY IS UNDER WAY".
You need to quit posting things he DIDN'T say because it's making you look absurdly foolish.
Oh come on Anthony...just last week you wrote a article proclaiming we are on the "verge of an EPIC market rally".
What did you do..Go all in on a market short! Your no different then the rest of the market manipulators!
"Either they push over the bears' defensives at 1,420 on better economic data....."
Existing home sales data due tomorrow seems to me to have slightly conservative predictions. Same thing with jobless claims for Thursday. However, friday's durable goods report scares me. It's always volatile and a 3-month streak of +% data would be unprecedented in 4 four years.
"..... or they succumb to the market's short-term overbought condition."
I don't think it's overbought until S&P breaks 1450. (at roughly PE=>16), which would give similar PE's to the period between 6/2010 and 6/2011, which suspect I is the "new era" average.
Total tax receipts from tax years 2000 to 2011 were 25.753 TRILLION(lower tax rates)--total tax receipts from 1988 to 1999 were 15.421 Trillion(higher tax rates). WHY?
good analysis anthony - the market shifts quickly and even though the volatility has slowed dramatically we now have low volume, tight trading ranges and the impossibility of going completely bullish or bearish long-term due to the varied technical, fundamental and geo-political ebbs, flows and vortexes. one must remain flexible and nimble in these trying times and yours is solid food for thought (although some posters impossibly want you to be prescient and omnipotent concurrently).
i do have one question: why not share a few of your losing positions every once in a while to let us know you are indeed human. keep up the nice data flow mr. prolific!
If you log on to these dating service sites, they hook you up with an investment advisor for your exciting date. You have to pay them a commission. Then, you go out to dinner. Then, they recommend you buy:
Proctor & Gamble
Johnson & Johnson
Royal Dutch Shell
There. I gave you that advice for free. So . . . buy me a drink. We're on a date!
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After Tuesday's rally, expect a big raid no matter the news. That's probably the safest way to play it ahead of the Fed.
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