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RoboStreet – September 2, 2021
Key Jobs Data And The Fed
There are numerous bullish and bearish market catalysts that can fuel further upside or trigger a sharp and well-overdue correction that has a lot of sideline money waiting in the wings to buy the proverbial dip when it finally comes. Big cap tech continues to hold sway over sector leadership with FAANG plus Microsoft, Adobe, Salesforce, and Nvidia all contributing to the push higher for the major indexes.
Tomorrow’s employment data is considered a game-changer for Fed policy that has been on a wait-and-see mission of late. If the estimate of the economy adding 750K Non-Farm Payroll jobs is met or exceeded, it is likely that the narrative will move toward the Fed talking up tapering QE at its September 22 FOMC meeting. By then, retail sales, CPI, PPI, housing data, and consumer sentiment figures will have all crossed the tape to compliment what has been upbeat manufacturing data released this week.
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.
The urge to sell the crowded tech sector and buy into the value and cyclical sectors is tempting, but there is a certain overriding sense of security by investors that tech can perform in any market environment. Hence, the strong appetite for the dominant stocks that have been a reliable source of portfolio gains since the lows of 2020. The sentiment will change and its timing will be where some terrific gains will be generated.
CURRENT TRADING LANDSCAPE
The $SPY continued to lose momentum and reached the $452 level. The value/reflationary stocks closed in the red. Technology stocks closed slightly higher.
The $DXY has broken above $90.60 resistance and has confirmed its breakout. The next level of resistance is at $94. The $TLT was trading at a 50-day moving average.
Based on the steep correction in the reflationary stocks, strong dollar, and overbought technology stocks, the market will continue the correction in September. The $SPY short-term support level is at $445, followed by $441.
The SPY overhead resistance is at $455. I expect the next stage of correction to resume this week or next. I would be a buyer of value stocks on corrections and sell technology stocks on rallies.
I would consider rebalancing the portfolio at this point to be more market neutral. The second wave of the sell will continue for the next 2-4 weeks. Market corrections are never a one-way trade.
Based on our models, the $SPY can pull back 3-5% from the all-time highs in the next 2-4 weeks. Based on our models, the market (SPY) will trade in the range between $425 and $455 for the next 2-4 weeks.
Among the areas of the market that don’t get nearly as much attention are the commodities sector. While there is constant reporting on crude oil, there is little coverage on most other commodities. The Commodity Research Bureau Index (CRB) consists of 19 commodities: Aluminum, Cocoa, Coffee, Copper, Corn, Cotton, Crude Oil, Gold, Heating Oil, Lean Hogs, Live Cattle, Natural Gas, Nickel, Orange Juice, RBOB Gasoline, Silver, Soybeans, Sugar and Wheat.
The index comprises 39% allocated to energy contracts, 41% to agriculture, 7% to precious metals, and 13% to industrial metals. As of the first week of 2021, the commodities market as a whole is up by 35% and most of that gain was in by early June. For the past three months, the commodities market has consolidated in a fairly tight range and now looks poised to resume its upside bias.
Looking ahead at where some undervalued opportunities lie, it’s my view that the secular rollout of electric cars and trucks is a huge demand curve for copper and a highly bullish theme for copper producers. From the www.copper.org website, the statistics for the future of copper are compelling.
“While conventional cars have 18-49 pounds of copper, hybrid electric vehicles (HEV) contain approximately 85 pounds, plug-in hybrid electric vehicles (PHEV) use 132 pounds, battery electric vehicles (BEVs) contain 183 pounds, a hybrid electric bus contains 196 pounds, and a battery-electric bus contains 814 pounds.”
Adding to the bullish theme is the fact that it takes an estimated 7 years to develop a new copper mine, which argues very well for the investment proposition in owning and trading the copper producer stocks, of which you can count on one hand. As such, my opinion is very high on Freeport-McMoRan Inc. (FCX) and its forward prospects for stellar sales and earnings growth.
Revenue for 2021 is set to rise by 63% to $23 billion and earnings to soar by 450% to $3.00 per share. With the stock trading at $36.60, it implies a P/E of just 12.1x that qualifies it as one of the quintessential value stocks in the market today and a leading candidate for being added to our RoboInvestor portfolio.
When we apply our AI-driven Forecast Toolbox to FCX, we get a “B” Model Grade rating with a Predicted Resistance price of $48.60, making for a strong upside move from where the stock currently trades.
Timing the entry point just right is what our AI tools afford us to benefit from as well as when to exit a position. Our RoboInvestor advisory service will invest in blue-chip stocks and ETFs that cover major indices, market sectors and sub-sectors, commodities, currencies, interest rates, and volatility. We’ll also utilize inverse ETFs to capture predictable downside moves in specific areas of market weakness.
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Take a hard look at what investment system you have in place and see if it measures up to what RoboInvestor is generating. We would warmly welcome all those readers of this blog to our community of RoboInvestors that don’t want to settle for anything less than consistent performance that has been market-tested with real money – my money, which participates in every trade I recommend.
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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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