The latter half of May was just crazy with stocks moving all over the place. It was two weeks ago today when the major indices plunged by approximately 2% on allegations that President Trump interfered with an FBI investigation. The financial media, along with many politicians, was even wondering aloud what the market would look like if POTUS had to step down.
But once everybody cooled off, stocks recovered nicely and embarked on a seven-session winning streak that completely reversed the pullback and ended only yesterday. In the end, the indices each finished the month in the green with the NASDAQ’s 2.5% advance leading the way. The S&P was up about 1.2% and the Dow inched forward around 0.3%.
But these last two sessions of May have lost the momentum. The S&P was down by 0.05% on Wednesday to 2411.8, though that still marks the fifth straight day ahead of 2400. The Dow was off by only 0.10% to 21008.7 and the NASDAQ slipped 0.08% to 6198.5. There is one adjective for this market that is making the rounds in the portfolios…and the word is “BORING”.
As Jeremy said in Zacks Counterstrike yesterday: “The last thing you want to do is overtrade in this (boring) environment and my personal trading lately is proof of that.” That goes for most of the portfolios so far this week, as the only moves we saw today were sells from TAZR Trader and Surprise Trader (though it should be noted that TAZR saw a double digit winner). The rest of the week may see activity pick up as we get several economic reports, including the big jobs number on Friday. For now, let today’s highlights tide you over:
Today's Portfolio Highlights:
TAZR Trader: Technology and Semis have led the market higher and they've led TAZR Trader to market-beating performance this year. But if the indexes roll over from here, Kevin does not believe these leaders will be spared. In fact, they might have the most excess to correct if a bigger wave of profit-taking takes hold. Today the editor sold Analog Devices (ADI) and Applied Optoelectronics (AAOI) to secure gains of 10% and 9%, respectively. This action follows a simple rule with short-term trading: “At least consider taking some profits, somewhere."
Reitmeister Trading Alert: "Once again, the fallacy of “Sell in May” is proven out as the S&P powered ahead by +1.2% while making new record highs.
"The obvious conclusion is to not gauge your investment decisions by the calendar. Or astronomy. Or reading tea leaves for that matter. Instead it is best to focus on the fundamental backdrop.
"In that light, it was obvious why stocks broke to new highs with GDP expected to be north of 3% in Q2. Plus, we are coming off the best earnings season in a long time. The cherry on top is ultra low bond rates which make stocks quite attractive value by comparison.
"The key is to realize it is no longer a rip-roaring bull market like after the election. That was a lot of pent of demand that finally took place once there was clarity on the election. Now we are back to what is typical for an aging bull market." -- Steve Reitmeister
Momentum Trader: "If the market continues on like this, it’s going to be a painfully boring summer. Typically, you expect to see volume dry up just before the kids go back to school. It’s not usually this boring this early on. Rather than harp on the boredom, let’s look to what could spice things up in the near future.
"Coming up this Friday we’ve got the non-farm payrolls number. That’s usually good for at least some short-term volatility for the day traders out there...Then there’s that little meeting in two weeks we need to look out for. That’s the Fed’s June meeting where they will most likely hike rates again. According to the CME’s FedWatch tool the market is pricing in a 91.2% chance of a rate hike in June.
"The game plan for equities moving forward should be to continue to load up on tech names with strong earnings. Chips have remained very strong during the last few months while the Trump trade has been stalled out since late December. Waiting for a small cap breakout will be painful but I think investors should be able to pick and choose new names to add as the Russell 2000 comes down to test the bottom end of the trading range." -- Dave Bartosiak
Options Trader: "The markets put in a blase' day with all of the major indexes finishing almost exactly where they did yesterday.
"Some may be scratching their heads as to why the market seems to be stuck here. But I don't see the market being stuck. I mean it's up 8% since the start of the year and we're trading within ticks of all-time highs. Stuck is not how I would characterize this market.
"The market is healthy. It's trading the way a bull market should. And at this pace, we're talking about a 15-20% return by year's end. Sounds A-OK to me." -- Kevin Matras
All the Best,
Jim Giaquinto
Recommendations from Zacks' Private Portfolios:
Believe it or not, this article is not available on the Zacks.com website. The commentary is a partial overview of the daily activity from Zacks' private recommendation services. If you would like to follow our Buy and Sell signals in real time, we've made a special arrangement for readers of this website. Starting today you can see all the recommendations from all of Zacks' portfolios absolutely free for 7 days. Our services cover everything from value stocks and momentum trades to insider buying and positive earnings surprises (which we've predicted with an astonishing 80%+ accuracy). Click here to "test drive" Zacks Ultimate for FREE >>
Zacks Investment Research