Investor Stocks #3 | Fed Spurs Markets | Value Stocks
Investor Stocks Series #3
Momentum Rider continues their investor stocks series on value stocks that have been strong in the first half of 2012. MR forecasted Sunday night for a test of 1,375 on the S&P 500 this week based on better than expected earnings and some help from Bernanke’s testimony. Today’s high was in fact a 1,375 retest from the high in early July and it finished at 1,372.
There could be a bit more upside tomorrow but the market is getting extended again in the short term so expect a pullback on Friday or early next week. The market is in a defined trading channel now and it may continue to bounce inside it for a little longer between 1,340 and 1,400.
It seems that many investors thought Bernanke’s testimony increased the chances of a QE3 program in the early Fall. That is one of the big reasons that the markets rebounded from the early selloff yesterday. Bernanke also stated that he doesn’t believe the US is headed for a double dip recession. That probably got some hesitant investors back off the sidelines.
In addition, a few big bellwether companies provided better than expected earnings as predicted. So the rally continued and may have a bit more to go.
But, at this point we have to remind investors and traders of the horrible 2011 selloff in August and September on European worries. The S&P 500 chart looked eerily similar in 2011 to the current 2012 chart and then the bottom fell out for a 16% plunge in late July and the first part of August. September 2011 was a bad month as well. Momentum Rider is not predicting that the same thing will happen at this point. However, institutions will be guarded going forward and we want investors to be vigilant and cautious. More frequent market attention and checking will be required from now on.
It is difficult this year to really get a dependable forecast on the second half of the year’s results. We always anticipate a strong fourth quarter based on seasonality and based on the last few years’ rallies. But with the “fiscal cliff”, European debt wildcards, China’s growth wildcards, and the uncertain Presidential election swings, this year will be more challenging than most. Try to be more tactical going into August and don’t get too overweight equities, especially ones with higher risk.
Power Stock Picks – Strong Investor Stocks (July 18):
Several of these strong investor stocks could be entered at better prices on pullbacks but all have the potential for more upside in 2012. Very strong investor stocks hitting near new highs usually head higher. Just be careful if their earnings disappoint because they can come off hard from the top.
Investor Notes and Investor Stocks:
MR recommends investors continue to remain cautious and lighter on riskier equities until after the longer term financial situation in Europe has more clarity. The short term is back to neutral with the potential for a higher move in earnings season. However, the 200 SMA is getting close so be ready to make some sells if necessary.
Gold and silver have not shown the strength MR anticipated in June and July. At this point silver needs to hold its final support at $27/oz or it could see a big drop. Gold’s key support area is $1,550/oz before creating increased selling. Precious metal investors need to be on watch to avoid a big fall and to free up cash to buy a big selloff if one comes. Both gold and silver are still great long term investments, but pain may be coming if buying doesn’t come very soon.
New Commodities Investor Alert: At some point in the Summer, MR believes that China will hit bottom and will start providing evidence of growth. This will be critical for the base metal and energy commodities and stocks to start moving up again. If the news is better than expected, then the commodities could be very strong late Summer and early Fall up to the election. This forecast is one reason we recently recommended select beaten down stocks in materials, energy, and agriculture. As an aside, China’s just released growth numbers showed that a hard landing is probably not going to happen – just a modest decrease in growth.
Some of our favorites in the commodities area could see 30%+ gains by year end from the current levels. Please refer back to our recent blog covering our top value stock favorites. Value Stocks in Commodities.
Also, MR just finished a blog for long term investors that want to take a little risk. MR made some value stock picks from 13 former superstars of the 1990′s in technology. The valuations are simply getting too attractive to not take a serious look at putting some money into these 13 companies. Several if not most of the stocks in this special list could see 30%+ gains in the next 6 to 12 months. Check it out here: 13 Value Stocks – 13 Former Tech Superstars
The caution alert for retirement accounts and investors is still present and will remain for the foreseeable future.
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