At the beginning of the month, I posted my 2016 Second Half Outlook. I know it is VERY early, but so far the blueprint is working out well:
1) The Brexit decline at the end of June may have been the last shakeout before the market finally breaks out of its two-years range. Many times before big price moves in stocks/markets, quick pullbacks occur to shakeout the weak hands.
2) It wouldn’t surprise me if we make new highs sooner than later. New highs came two days after the post.
3) If we breakout, we could see the “chase trade” start to happen. This hasn’t even begun to happen as many big fund managers I know have HUGE short books and have not started to cover.
4) Best to focus on the strongest growth sector which is the “cloud related” stocks. This group is showing tremendous relative strength and is responsible for a good portion of my gains so far this month.
5) I specifically mentioned ACIA as one of our positions. I took partial profits for my clients when the stock was up 38%. Our remaining position is up +55% since our purchase.
6) The low interest rate environment will help M&A activity as companies will find it easier to finance large deals. WhiteWave Foods (WWAV) and ARM Holdings (ARMH) are two examples so far. I believe many more are coming this year.
Calling for moves in the market doesn’t matter unless you take advantage of them. Some people say “don’t predict” but I believe you should have some vision of where you think things are going, and then let the market prove you right or wrong. I am pleased that this month is off to a strong start for my clients, but the big question is: Where do we go from here? I stick to my call from early April that the Dow will reach 20,000 by year-end. Will it be a straight line up? Of course not, but that’s why you need to know your timeframe!
My feeling is the market might not allow the people on the sidelines to get in. The price action is very strong and it’s reminding me of early 2013 after the Fiscal Cliff vote. At that time, so many fund managers were waiting for a pullback to get in the market, but it never came. For now, I can’t stress the importance of knowing your timeframe, putting in the work, having a strategy, and executing your plan as best as possible. Good luck!
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