It wasn't too long ago when Dow 20,000 looked to be at hand. But now the index has slumped for five consecutive days and is more than 250 points away from the milestone. It will eventually surpass that mark, but the “Trump Trade” has turned into the “Trump Slump” as we near the Inauguration.
On Thursday – the day before the swearing-in – the Dow was down 0.37% to 19,732.4. Meanwhile, the S&P was off 0.36% to 2263.7 and the NASDAQ slipped 0.28% to 5540.1. Looking back, the first month or so of President Obama’s initial term was pretty bad for the market, but now we look at the outgoing president’s time as a lucrative one for stocks. So with a growing economy and low employment (reiterated again today with strong weekly jobless claims), stocks will eventually resume the climb higher even if there’s some jitters after the transition.
In the portfolios, Surprise Trader got a lucky break with one of its recent additions, and the editor decided to sell half of it for a double-digit profit. Also, Reitmeister Trading Alert bought a banking position to take advantage of rising rates, while Momentum Trader added a stock to capitalize on an expected strong quarter for energy. Learn more about these moves in the highlights section below:
Fortune Favors the Surprise Trader
→ It never hurts to have some luck on your side when it comes to investing. CSX (NASDAQ:CSX) had a lukewarm report the other day, but shares surged Thursday on news that a former railroad CEO and an activist investor plan to shake things up at the railroad company. Eric took advantage of this good fortune by selling half of the Surprise Trader’s position in CSX for a 15.7% return. He’ll hold onto the second half for now.
Today's Portfolio Highlights:
• After a recent round of profit taking, the Reitmeister Trading Alert is looking to increase its exposure to rising rates. Since banks are among the biggest beneficiaries, Steve added a 5% position in Community Bank ETF (QABA). But the editor isn’t sure that the group has sold off enough, so he wants you to consider this move as the first of two; the plan is to bump it up to an 8% allocation in the near future. Along with last October’s position in TMV, Steve believes the portfolio has nice exposure to rising rates. Read about all of today’s portfolio moves in the complete commentary.
• The S&P in aggregate is expected to see EPS growth of about 3% in the fourth quarter…but energy sector earnings are expected to soar 17%! Now that’s momentum! It’s easy to see why Momentum Trader wanted to increase its exposure to this space. Dave decided to add WPX Energy (WPX), a Zacks Rank #2 (Buy) natural gas and oil company. The stock pulled back to support since popping up on his screener, and the editor plans to be onboard for its next leg higher. Dave put the portfolio’s remaining cash into WPX, which comes to an allocation of 10%. Learn more about this new addition in the complete commentary, including a detailed look at its chart.
• "It seems as if traders wanted to hedge some risk before tomorrow’s inauguration. I’m not sure why, to me there doesn’t seem to be any perceived risk to the event.
"The reason I think it has to do with the actually event is the relation between VIX and VIX futures. When markets sold of the VIX saw a violent spike above 13, a move of 5%. However, the futures only move 2%, from about 14.15 to 14.50. This lack of any substantial move in the futures tells me that traders aren’t really committed to lifting the VIX for any long period of time.
"The portfolio will remain committed to long positions in the idea that Dow 20k is coming. Until I’m convinced otherwise, we will remain with that outlook. For those that have been with Counterstrike a while, you know I’m not stubborn and will easily change my view as the market atmosphere changes," said Jeremy in Zacks Counterstrike.
• "Stocks extended their losing streak again with the Dow having its worst day since November.
"No one is talking about Dow 20,000 right now.
"But this pullback is healthy for the market. I think we can all agree that expectations had become a bit elevated. Sanity is returning and that means opportunities for you to get into stocks that had seem to run away from you. If you liked the banks 2 weeks ago, you like them even more now because they've sold off a couple percent in that time," said Tracey in Insider Trader.
Good Evening,
Jim Giaquinto
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