Time To Look For Opportunities:
The stock market has finally given buyers a chance to reevaluate new entry points. After a stellar 2013 with the S&P 500 having its best yearly gain in 16 years and the Dow rising at the highest level annualized in 18 years, equities proved to be the right move. Our ToryCapital predictions for 2013 were right on target (-the 2014 predictions are coming soon). The NASDAQ was up 38 percent and equites have only looked back slightly with a minor dip since November. Stocks have been losing ground for the last few days and the key concern for those looking to reenter the market is if the current fade is part of a longer-term reversal.
The overall long-term market trends still seem to be in tact but this could change if shorts decide to push new buyer sentiment lower and get no resistance. The 50 day MACD for the S&P 500 has been a reliable level of support for the last couple of years and the sharp fall in prices in the final minutes of trading Friday suggest shaky holders have given the market what it needs to stabilize with a major distribution day.
It’s time to create a shopping list and begin looking at stocks with long term growth prospects. I am partial to digital media sector and the financials. If they break current support levels, I would reevaluate the longer term trend and look for buy points for medium term holds. I am looking for new leaders in the social media space to help decide if there could be sector rotation in favor of large cap stocks. A significant rise in small caps would make me less patient with my shopping list.
FOMC Meets This Week: Will Yellen Yell?
The FOMC meeting this week may acknowledge the low participation rate concerning jobs growth and signal a willingness to hold QE levels steady without causing nervousness about unnecessary tapering. Janet Yellen doesn’t want to rock the boat, but she may soon decide to show the world she is the new sheriff in town to increase her future signaling power. This could be key to determining whether longer-term sentiment shifts back to bonds and decrease risk taking which the economy cannot afford with real unemployment at 10 percent using a constant labor participation rate averaged over the last five years. A sharp bullish reversal is possible but buying on the dip remains a good strategy in the medium run.