After a few days of declines, the question of the day is if the current rally, which began in early October, is just resting or about to morph into the type of month-long corrective phases that have been prevalent since June?
Since the middle of April, the trend of the stock market has been fairly easy to identify. Stocks have tended to rally for a month or so and then correct for a month. In short, it’s been a stair-step affair with the end result being positive. However, both teams have had decent opportunities for the past six months.
Both Teams Have a Case
Currently, there are good arguments from both sides of the field. The bears contend that “the taper” being back on the table as a possibility in December means that the current joyride to the upside is over. Those dressed in their furry costumes also say that earnings have not been all that great and that higher rates will start to bite at some point soon.
However, the bull camp suggests that March/April 2014 remains the most realistic time frame for the Fed to begin tapering their bond-buying stimulus program and as such, the switch for liquidity trade is back in the “on” position. In addition, those wearing the rose-colored Ray Bans argue that the fundamental backdrop for stocks remains positive and that any dips should be bought for the foreseeable future.
Time To Review The Cycle Projections
Although the economic news of the day is likely to dominate trading in the coming week (remember – the October Jobs report is due out next week), investors should note that the month of November has a pretty good reputation for generating gains. So, with the market looking uncertain, it is time to review what the historical cycles have to say about the month November.
To be fair, the chart above does appear to be a bit extended….
David Moenning is the founder and chief investment strategist for StateoftheMarkets.com, a website dedicated to investor education and portfolio analysis. Mr. Moenning is also President of Heritage Capital Management, a privately owned, investment management firm. Founded in 1989, Heritage is focuses on risk management and an “own the best and ignore the rest” equity selection strategy.
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Positions in stocks mentioned: none
The opinions and forecasts expressed are those of David Moenning, President of Heritage Capital Management (HCM) and may not actually come to pass. Mr. Moenning’s opinions and viewpoints regarding the future of the markets should not be construed as recommendations of any specific security or Heritage Capital program. No part of this material is intended as an investment recommendation. Neither the information nor any opinion expressed constitutes a solicitation to purchase or sell securities or any of HCM’s programs. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that investment objectives outlined will actually come to pass. Investors should consult an Investment Professional before investing in any investment program. Neither Mr. Moenning or Heritage Capital Management nor any of their employees shall have any liability for any loss sustained by anyone who has relied on the information contained herein. Mr. Moenning and employees of HCM may at times have positions in the securities referred to and may make purchases or sales of these securities while this publication is in circulation. The analysis contained is based on both technical and fundamental research. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.