If you’re a fund manager, this year has to be either a blessing or a curse. Pullbacks and dips have been brief, surprising many with Ms. Market’s agility and stamina. Waiting for a dip of even 3% only happened once this year. And, while the bears will surely get their day in the sun, today does not look like one of them.
No Dips to Buy
Futures are green this morning. Amazon crushed earnings. Microsoft acquisition of LinkedIn paid off to the tune of an additional billion in revenues. Intel is dominating. And Google, well let’s just say they did very well. So, do you go out and buy technology today? Yes and no. Some stocks
Some stocks in this group are still basing inside current patterns. Take Facebook for example. This morning it’s trading higher in pre-market action. Applied Materials, an IBD50 stock that has performed exceptionally well since appearing on the watch lists in September, continues higher. That said, it hasn’t run away from the pack. The point is, there are still stocks in the tech sector that have either reported or report soon, that will most likely continue higher. Fund managers have two months until bonus time, so we’ll be looking for the tell-tale signs of their activity.
The point is, there are still stocks in the tech sector that have either reported or report soon, that will most likely continue higher. Fund managers have two months until bonus time, so we’ll be looking for the tell-tale signs of their activity.
Rotation Rotation Rotation
So many people have mentioned rotation that it almost seems inevitable. With no dips to buy this year, money has rotated from sector to sector. Where is it headed next? My guess is the sectors that have pulled back are the sectors where the money will flow next.
Energy and Healthcare
With all the news about the latter, the pullback to the 20ma looks appetizing. Note the wick at the 20ma, in addition to rising, giving a hint of buyers. Wait for signs that a bounce is in order, like a big green candle today. If we want to be safe we’ll wait for a follow-through day next week.
Energy broke out of a 10-month downtrend in September. Then, we started a consolidation of those gains in the past few weeks, conveniently above the 200ma. With big oil and gas stocks reporting, we’ll watch for signs that buyers are active.
Home builders and construction have done well, now wait for a pullback or rotation. We’ll look for signs of continued interest and if none show up soon, we’ll start taking some profits off the table, looking for rotation as these industry groups get overheated. Use the ToD setup for breakouts.
In any case, we’ll be talking about the state of the markets today, so be sure to tune in during the LIVE broadcast if you have the time. We’ll be “on the air” around 9:20 AM.