Yesterday’s blog title advised you to scale into call positions – today we are breaking out. I don’t advertise on my blog and I spend hours each day on research. Please tell your friends about my blog (re-Tweet) and write a review on INVESTIMONIALS Your comments motivate me to keep posting.
I’m going to keep my comments brief today. This is a good opportunity to get long.
The SPY is breaking out through resistance. We want to see the volume increase and we want to see continuation.
Stocks have consolidated over the last few weeks and there should be enough strength to push this market higher. Asset Managers did not get the dip they were hoping for and they will get a little more aggressive each day. They do not want to miss a year-end rally.
Yesterday, a study conducted by the Fed suggested that they lower their unemployment target from 6.5% to 5.5%. They have not endorsed the findings, but if they do it means that we won’t see tightening until 2017. This could be the catalyst that pushes the market higher.
All of the economic news has been excellent the last few weeks. Retail sales, ADP, Chicago PMI, ISM manufacturing, ISM services and all of the global PMI’s exceeded estimates. Credit concerns are low and that dark cloud will not plague the market.
Politicians have kicked the debt ceiling can down the road and it won’t be an issue for at least a month. Republicans were humbled during the last round of negotiations and the rhetoric should be less contentious.
Bond yields have declined and the US 10-Year is trading below the dividend yield on the S&P 500. Stocks are attractively valued.
Earnings season has unfolded as planned. Analysts are maintaining earnings projections for the S&P 500. Cash flows are at record levels and companies are buying back shares.
There is a stiff tailwind and the market has had time to gather strength. I suggested scaling into December calls yesterday – you should add today. This breakout needs to hold and we will use SPY $177 as a closing stop.
The market looks strong this morning and it will push higher. The Fed study will attract buyers.