Oct 26

The Market Today 10/25/13: High


This has become almost a daily occurrence, the market closing at a new high! It closed at another new high today! The question now becomes, how much more can this market climb? The market has overcome significant obstacles on it’s way to new high’s this year. Most recently, we had the debt ceiling and Government shutdown. Earlier, we had interest rates on the ten year treasury knocking on the door of 3%! We have seen turmoil around the globe, whether it was Syria, or the debt problem’s of Greece, Italy, and Portugal. So many problem’s, so many issue’s to overcome. But the market has overcome all these problem’s and issue’s. As I have mentioned in my previous commentary, there are a couple of major catalyst’s to move this market higher. To remind you, first I look at the recent Government shutdown. This shutdown was the main reason the Fed did not begin to Taper their bond purchasing program, otherwise known as Quantitative Easing(QE). From all indications, the QE program will not be ending until the end of the first quarter, or beginning of the second quarter of next year. What does this mean? It mean’s that the liquidity that the Fed has been providing since the end of the Financial Crisis, will continue. Let’s face it, the market has been addicted to this liquidity drug for a few year’s. Due to the shutdown, the market’s dependence on it’s addiction will continue. Second, most of the major hedge fund’s are severely under performing the market. Due to this fact, these same hedge funds will have to be chasing performance, to play catch up so to speak. They will be buying to stock’s to catch up.

High: Stocks

As I just mentioned, hedge fund’s will be buying stock’s to play catch up. It beg’s the question, which stock’s will they be buying? I would first focus on the current market leader’s. Stock’s such as PCLN, CMG, NFLX, LNKD, BWLD, LL, GOOG, and AAPL to name a few. That is where the primary focus should be placed. I would also start to pay attention to the market laggards. Start taking a look at the steel names, coal names, and other commodity names. These stock’s have severely lagged the market, and significant money can be made if the hedge fund money start’s to pour into them. In fact, these names have been starting to heat up already! The market leader’s have seen significant gains in the last few week’s, let alone the entire year. This plan is already playing itself out. Not to say that the market will not pull back at all. In fact, I think a small correction is in the cards. I hope that it happen’s soon. I want this, so that I can buy these stocks at a lower price! I know that you have heard the buy the dip’s mentality, and I feel that we can still buy the dip’s here! While a correction may be in the card’s, the market will close on a new high by the end of the year!

High: Bonds

The range that I have mentioned in earlier commentary’s for the bond market in term’s of yield are also playing out. I mentioned that the new trading range, from 2.50-2.8%. We are now at the 2.5% mark. Will we see s new high in the bond market in terms of yield or price? The answer to both is no. As far as yield, the only way  see a new high in term’s of price, would be an event like a debt default from the US, or European country. This is unlikely. I do see a new a new high in term’s of yield next year!

Author Sean Rhodes is an expert in financial markets and helping you manage your money. For a no-risk consultation, check out Sean at the following link for more information and expert advice on investing in equities and helping clients participate the the market’s new high!

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