I’m more positive than most people on the market for the following reasons:
1) Indexes – The big institutions control the market. Therefore, it’s important to learn how to read charts and interpret what they are doing on a consistent basis. Right now, the Nasdaq Composite and S&P 500 are above strong levels of institutional support. When the market pulls back, they are normal pullbacks to logical areas of support. As long as the institutions keep supporting this market, I’m not going to argue with it.
2) 90% of what I use to judge the health of the market is the price action of growth stocks. This price action continues to improve and it’s occurring across many sectors such as Mega Caps, Software, Semiconductors, Biotech, Medical Products, Retail, and Housing.
3) Sentiment is fairly muted. You could argue that it is borderline miserable. Just ask 10 people what they think of the market and that should tell you everything. Sentiment is important because the market tends to fool the majority.
4) The Fed is done raising rates for the year. The market is a discounting mechanism and tends to trade on what’s going to happen six to nine months from now. I don’t think they will cut rates anytime soon, but the market is slowly anticipating the end of their current rate-hiking cycle.
Please keep in mind that I’m not saying we’re going to the moon from here. However, I don’t see any SUSTAINED downside over the near term because the major indexes are strong, and most people become VERY bearish VERY quickly on any little drop in the market. Also, I’m more focused on my stocks that I feel have strong potential over the next 6-12 months, and I’m ok with the market staying in a range for a while. I’m aware there are still headwinds with the regional banks, the debt ceiling, and the overall economy, but most of these problems are known and the market might have already discounted most of the bad news.
I can be reached at: jfahmy@zorcapital.com.
Disclaimer: This information is issued solely for informational and educational purposes and does not constitute an offer to sell or a solicitation of an offer to buy securities. None of the information contained on this blog constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. From time to time, the content creator or its affiliates may hold positions or other interests in securities mentioned on this blog. The stocks presented are not to be considered a recommendation to buy any stock. This material does not take into account your particular investment objectives. Investors should consult their own financial or investment adviser before trading or acting upon any information provided. Past performance is not indicative of future results.