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RoboStreet May 24, 2018
No Go on North Korea Summit Stymies Rally Attempt
The week leading up to the extended Memorial Day holiday weekend is typically upbeat for stocks. More confusion about the deal or no-deal with China and the possible delay of the North Korean summit hit stocks on Wednesday, but buyers stepped in on the sharply lower opening supporting the market to where much of the gains have been pared. Yesterday, the meeting with Kim Jung Un was canceled- a setback for obvious reasons and thereby triggering a more cautious stance by investors who scurried to the bond market and sent the yield on the 10-yr Treasury down to 2.94%.
While the news of the canceled summit might cause the market to pause, the broader tone as of late has been improving, as evidenced by the market’s resilience to negative headlines. But then again, there has been a rotation of leadership that afforded the tech sector to regroup after getting de-FAANG-ed for much of the February-April timeframe. It was the energy, railroads and materials sectors that took the lead while the market’s favorite sectors (tech, financials, defense/aerospace, industrials) consolidated during the first quarter earnings season.
Just as the yield on the 10-yr T-Note touched 3.1%, we booked a nice 6.26% profit in the SPDR S&P Bank ETF (KBE) with a holding period of only 36 days for the RoboInvestor Portfolio. This makes for four successful and profitable trades that we have harvested since launching the service on March 12. And currently, we have five open stock positions that are all trading above our cost basis. My AI system is working overtime to keep the capital gains coming in at a steady pace in what is a very choppy market environment.
And remember we’re not talking about day-trading here. I’m looking for 50-100% gains inside of the next 3 months, so my weekly updates are timely enough for you to act.
Heading into the last week of May, the FAANG stocks have reasserted themselves with only Alphabet trading off its all-time high. There is also excellent leadership from other market favorites Microsoft, Micron Technology, NVIDIA Corp., Adobe Systems, Boeing,
MasterCard, JPMorgan and some specialty retailers like TJX Companies. So, despite the news surrounding North Korea is a non-starter, the domestic and global economies continue to exhibit steady growth.
The International Monetary Fund’s April 2018 World Economic Outlook forecast cited a cyclical upswing that was fostered by structural change. The report stated “The global economic upswing that began around mid-2016 has become broader and stronger. This new World Economic Outlook report projects advanced economies as a group will continue to expand above their potential growth rates this year and next before decelerating, while growth in emerging market and developing economies will rise before leveling off.”
World growth strengthened in 2017 to 3.8%, with a notable rebound in global trade. It was driven by an investment recovery in advanced economies, continued strong growth in emerging Asia, a notable upswing in emerging Europe, and signs of recovery in several commodity exporters. Global growth is expected to tick up to 3.9%-4.0% this year and next, supported by strong momentum, favorable market sentiment, accommodative financial conditions, and the domestic and international repercussions of expansionary fiscal policy in the United States. The partial recovery in commodity prices should allow conditions for commodity exporters to gradually improve.
Source: www.imf.org
Against this bullish macro economic backdrop, the primary bull trend should remain intact while still being subject to seasonality issues and geopolitical disruptions such as what we’ve witnessed this week. The market is entering somewhat of a quiet period where first quarter earnings season has concluded with the Fed’s FOMC meeting slated for June 13 that is highly expected to result in a quarter-point hike in the Fed Funds Rate to 1.75%-2.00%.
Aside from M&A news, it is my view there won’t be a lot of market catalysts to drive the major averages to new highs with maybe the exception of the Russell 2000 which has achieved a new all-time high this week. The rotation to small cap stocks is a direct result of the strong move up for the dollar and how small caps lagged the other indexes for 2017 and early 2018. It’s the small cap market’s time to shine and this is where investor focus has turned to of late.
So, while the Russell is having its day in the sun, the forecast according to my Tradespoon Seasonal Chart shows the road ahead for the next four months will be a market defined by a fairly wide trading range. Looking at the 20 Days, 30 Days, 40 Days and 50 Days Forecast/Accuracy box in the upper right of the Seasonal Chart for the SPDR S&P 500 ETF Trust (SPY), we’re getting a high probability reading of 79%-87% that this forward trading range will unfold.
This would correlate with many prior years where the summer months are somewhat directionless to where buying the dips and selling the rallies in specific stocks is the most productive course of action. This year looks to replicate that pattern and we’ll be trading it accordingly in the RoboInvestor Portfolio with those stocks that carry the highest ratings by my AI system.
I couldn’t imagine risking hard earned capital in market with such an elevated level of headline risk without the aid of a stress-tested, scientific always-learning AI system that finds stocks that repel market volatility like a Teflon coating. Taking on the market that is defined and dominated by high-speed computer-generated trading systems without the right tools just doesn’t make sense and is, to be quite honest, taking a complacent approach to putting money at risk. Tradespoon tools remove much of that risk and this is why our trades make money over 80% of the time.
I’ll be adding two new stock picks when the next issue of RoboInvestor is published for distribution on June 3 to complement our current holdings. By getting involved now, while the market is wrestling with geopolitics, new subscribers can position themselves in our already-winning trading strategies and be set to participate in our next two trades, poised to deliver more profits to our members. While the seasonal chart shows clearly an upside bias for the S&P in the Q4 2018, there is still abundant opportunity to cash in on numerous trades over the next several months.
My experience, my AI system, and my guidance on every trade will get us there. I do all the driving. The only question readers of this column have to ask is if they want to be along for the smooth ride that RoboInvestor has to offer.
And remember we’re not talking about day-trading here. I’m looking for 50-100% gains inside of the next 3 months, so my weekly updates are timely enough for you to act.
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