Special Report – The New Bull Market Just Started – What To Do Now
As we’ve been pontificating here for weeks, the best time of the year historically to invest in the stock market has been the November 1 through April 30 time frame. This is the period when the “sell in May and go away” horde comes back in droves to the stock market. And we are certainly seeing that situation playing out in the current market.
The DJIA ended Friday at 10,530.76 – about 330 points higher than its October bottom in the 10,200 area. That’s about a 3% increase for this stodgy old index. Not bad for a 16 day move!
And the NASDAQ has done twice as well! Since the Piercing Pattern bottom for the chart on October 13 at around 2,048, the NAS has been on a tear – rising around 6% to its present level of 2,169.43. Not to mention the fact that the index put in its best weekly gain in 14 months (since mid-August 2004), at 3.8%.
Other than the seasonality issue, we have many reasons to continue feeling very bullish. Here are a few:
1) The market is shrugging off bad news.
Stocks could have easily tanked Friday with the monthly jobs report. Traders eagerly look forward to this report each month, since it usually indicates the strength or weakness of the economy. The report showed non-farm payrolls grew a less than expected 56,000 in October. That tepid jobs growth was offset by a jump in hourly earnings, however, and that combination is unlikely to change the Fed’s course of “measured” rate hikes.
2) The market is acting like it should in a bull market rally.
In a bull market rally, what you want to see is higher volume on the upmoves and lower volume on the moves down. That’s exactly what we saw last week, and we see no reason to expect differently in the near future as this new rally blasts off.
3) The market is responding positively to good economic data.
In contrast to just a few short weeks ago, the market is no longer operating on the premise that “all news is bad news”. Reports of fairly solid economic growth are fueling this latest advance. Recent data have shown worker productivity picking up, October retail sales better than expected, and both the manufacturing and service sectors seem to have recovered from their hurricane-driven softness.
4) Stocks are breaking out on great earnings reports.
Many companies are beating earnings estimates, and are being rewarded handsomely by nice breakouts. And in some cases, one-day gains that many investors would be overjoyed to bank in an entire year!
For instance, take a look at CUTR – Cutera Inc. The company makes lasers and other medical devices used in cosmetic procedures - and blew out earnings estimates last week, shooting up an incredible 31%. These are the possibilities in a new bull market!
5) The Fed finally changed its language.
As expected, the Fed raised interest rates another quarter point last week. But this time, they changed their language from past meetings. Basically, they admitted the core rate of inflation was not that bad, which is good news for investors. It means the Fed does not intend to keep raising rates forever. We foresee perhaps just two more increases, one in December and the final one on Greenspan’s last day in office, January 31, 2006.
Historically, when the Fed finally is done with rate increases, a market rally then ensues. Sometimes a HUGE rally, like the one in the mid-1990’s. Mega-fortunes were made in that one - will history repeat itself?
I know one thing – Trade Your Way To Wealth will be on top of these events, and will be in the stocks creating those mega-fortunes. And my Members will benefit from that!
Also, we are continuing to see sector rotation, as the leaders of the old bull market fall by the wayside and new leadership takes over.
With consumer spending much better than expected in October, the retail sector is moving to the forefront of this new bull market rally. Department stores, clothing stores and discounters were strong the last five trading days. Each sector climbed more than 10% last week.
Also, we are seeing strength in the transportation sector. Transportation services – which includes companies such as C.H. Robinson Worldwide, UTI Worldwide and Hub Group – were up a healthy 9% last week.
TYWTW Members – we will be updating all areas of the site this week. Our Stock Fishing and CAN-CAN Portfolios have been very strong recently – beating almost all market averages as well as the Top 100 Investors in the Marketocracy portfolio over all time frames.
Here’s the latest email update I received from Marketocracy regarding the performance of Stock Fishing and CAN-CAN:
November 04, 2005 funds report for Daryl Thompson (TheDaryl)
SFF
* Name: Stock Fishing Fund
* Net Asset Value (NAV): $11.97
* Compliant: No
* Since last weekday report
+ Return: 0.76%
+ Did you beat the:
o S&P 500 (return of 0.02%): YES
o NASDAQ (return of 0.43%): YES
o Dow Jones (return of 0.08%): YES
* This past week
+ Return: 6.07%
+ Did you beat the:
o S&P 500 (return of 1.81%): YES
o NASDAQ (return of 3.81%): YES
o Dow Jones (return of 1.23%): YES
* Trailing 30 days
+ Return: 2.32%
+ Did you beat the:
o S&P 500 (return of 1.99%): YES
o NASDAQ (return of 3.16%): NO
o Dow Jones (return of 2.07%): YES
CCF
* Name: CAN-CAN Fund
* Net Asset Value (NAV): $11.36
* Compliant: Yes
* Since last weekday report
+ Return: 0.20%
+ Did you beat the:
o S&P 500 (return of 0.02%): YES
o NASDAQ (return of 0.43%): NO
o Dow Jones (return of 0.08%): YES
* This past week
+ Return: 6.53%
+ Did you beat the:
o S&P 500 (return of 1.81%): YES
o NASDAQ (return of 3.81%): YES
o Dow Jones (return of 1.23%): YES
* Trailing 30 days
+ Return: 6.18%
+ Did you beat the:
o S&P 500 (return of 1.99%): YES
o NASDAQ (return of 3.16%): YES
o Dow Jones (return of 2.07%): YES
**************************************************
Keep one thing in mind as you review the above report. These funds were started months ago with some stocks I thought looked good at the time. Only one update has been made since then. And these are our conservative portfolios!
This proves that with good stock selection done every few months, you can easily beat the market over time, without frenetic in-and-out day-trading, if you so desire.
However, from here on out I will be updating these portfolios once a week, in order to try to eliminate some of the short-term drawdowns that may take a month or two to make up, even with great stocks overall.
What to do now? Buy great stocks just breaking out or set up to break out. This is what works in a bull market, and this is what is working now. Our TYWTW Members will know exactly which stocks those are.