The decline that started on Monday continued through the early part of the session on Wednesday. This was a further test of investor conviction. You failed this test if you sold under the pressure of such a minor pull back. You passed with flying colors if you held on and saw the nice late day rally.
Simply no one knows for sure what the market will do tomorrow, next week or next month for that matter. But the further out you go, the clearer you can see what will happen because the movement of the market over time will be based on fundamentals. And right now the fundamentals are clearly improving as we can see from measures like corporate profits, GDP or even the jobs picture that is now turning around.
The more we stay focused on these fundamentals the more profitable we will be. And the less likely we will be to try and figure out what the market will do in the short run. That is the toughest game in town.
Turning back to the fundamentals we got a very nice Jobless Claims report Wednesday showing 435,000 new claims versus the 450,000 estimate. Better yet, this makes 2 out of the last 3 weeks coming in under 450,000. Combine this with the positive readings from the October Employment report and the dots are starting to connect towards real improvements in the job market.
No, unemployment in America has not been solved. But we are starting to make a turn for the better. Every step in that direction helps the cause for economic growth, corporate earnings and stocks. And that is the fundamental reason to stay invested right now.
(For more insight on the fundamental case for the stock market at this time, then check out my recent article; 4 Reasons Why Stocks Are Ready to Make New Highs)
My Two Cents
(During the day I read many other investment articles of interest. Here are links to some new ones with my 2 cents added underneath).
Lower bond rates to raise inflation is like having a war to create peace. Because higher inflation begets higher bond rates. Seems that the bond vigilantes are on to him. Better stock up on TBT to profit as the 30 year bond rally comes to an end.
McDonalds is one of the few companies that never really got hammered during the Great Recession. Their profit growth has been steady as she goes for 5 years plus and no wonder shares keep pressing higher.
Earnings estimates for next year continue to rise with many analysts calling for more than $2 per share. That means that SOL is only trading at a PE of 12. Quite modest given the growth prospects. My original position is just under $8 per share. But on this recent dip I am loading up with a bit more. I think that $16-19 is a reasonable 12 month target. (Note that some brokerage firms are looking for up to $23)
For a long time the shorts were ganged up on this stock with well over 10% shares shorted. Yet quarter after quarter PCLN just kept banging out huge earnings surprises. Many shorts have thrown in the towel on the ride up from $200 to $400+.You gotta laugh at anyone still hoping for this stock to implode (just not going to happen).
Disclosure: Of course I own shares of TBT, SOL and PCLN...or why else would I be recommending them to others???