Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

S&P Target 1190. Now What?

S&P 1190 is back. Actually, as I write this, August 29 at 14:30 EST, we went through it like a knife through hot butter. We are at 1205. No need to rehash my previous articles, this has been an important technical pivot point. The question was whether 1120 would hold, and it did. I started nibbling on Thursday 18 at the close, at around 1140 https://seekingalpha.com/article/288534-technicals-work-time-to-look-at-fundamentals, and some stocks are up by 10% plus. Now What?
 

 
Simply put, we are going higher. Depending on whether you take the intraday or closing tops and bottoms, the current 38.2% Fibonacci consolidation range of the 1346-1102 move is 1195-1206. We have been there for three hours, with a strong 9-to-1 advance-decline ratio. We may need to rest a bit after the past five days, but 1260 seems a reasonable short term target, as the 61.8% retracement. While none of the Doomsday potential problems have been resolved, they have been announced. We know what Bernanke, Trichet, and Lagarde think – or at least what they say. They did not cave in. Neither did Merkel, Sarkozy, Berlusconi or Zapatero. Since I am not smart enough to know what they really mean, I take my cue from the markets. The EuroDollar September Futures broke 1.45 today, supposedly on the merger of two failing Greek banks. The IShares High Yield ETF (NYSEARCA:HYG) gapped up, so did many stocks. While Hurricane Irene may have something to do with some US stocks, the move is wider than that, and violent. Remember, I told you buy trashed stocks – my list today is full of 4% plus movers.
 
In a sense, the speed of the recovery is always the unnerving part of a panic bottom. I go back to my comment of August 16  https://seekingalpha.com/article/287649-reacting-to-the-market-s-irrational-behavior  when I suggested we cut the tails off these moves. Nobody sells tops or buys bottoms. In addition, not all stocks top or bottom at the same time. We were exactly at the same levels, S&P 1205, HYG 86.70, on the back of a EuroDollar September Futures rally to 1.44. We then went to 1120 first. Now, it’s 1270 time.
 
Among the stocks I would continue to buy: Johnson Controls (JCI - $31.4), $40 billion in sales of building controls and battery/auto OEM, selling at 12 times forward estimates and a 2% yield, Federal Agricultural Mortgage “Farmer Mac” (AGM - $20.4, extremely thin, $180Mn market cap), the Fannie to the Farmers, but with only $10 billion in assets and at least we know what the collateral is worth, selling at 5 times…, Autodesk (ADSK - $28), the $2Bn sales leader in architectural design software, selling at 20 times, United Rentals (URI - $17), $2.5Bn in rentals/sales of construction equipment, a fairly simple business to understand, albeit leveraged, still selling at 12 times depressed earnings https://seekingalpha.com/article/289439-9-stocks-set-to-benefit-from-the-earthquake , and Barclays (BCS - $10.8), my only choice in the International large bank sector. I would also take 10% profits on Pike Electric (PIKE - $8.75). It is not participating despite Irene and I'd rather wait for the EPS release on 9/6 bmo to reassess the balance sheet.

Tough to chase anything, hence keep my suggestion in mind. Forget you did not buy the bottom. Look at Fundamentals, and take that giant leap of Faith. The Hurricane is over.
 
Disclaimer:As a Registered Investment Advisor, there are a few things we must tell you. We do not know your personal financial situation or investment objectives, so this article does not constitute a solicitation to purchase or sell any of the securities mentioned, nor is it intended to provide specific investment advice. Past performance is no guarantee of future performance. We live this every day, and you should know it too. The value of the securities mentioned herein may fall or rise and are not insured by any government or private company, even if it meant something. We believe what we write, and we take your audience quite seriously. However, since we cannot be held responsible for any loss or damage caused by reliance on the information and data herein, you should consult with your own advisor and/or do your own research before acting on any of our opinions.

Instablog courtesy of Capital Max (r) and The Other Street (r)


Disclosure: I am long JCI, AGM, ADSK, URI, BCS, VECO, EME, IR, WSBC, PPG.