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Two weeks ago, the title of our update was "Green Shoots Are Beginning to Show in the Market," and we talked about how rising rates sent the market back to support – which turned out to be accurate. The major indexes bounced on the 8th and have been rising (mostly) since then.
The shift in sentiment has been caused by nearly the reverse of the issues that drove the market lower in the first place. Over the last two weeks, market fundamentals have remained positive but have started to moderate.
As counterintuitive as that sounds, slightly less good news (and some bad news in China) relieves some of the pressure on interest rates and is supportive for stock prices.
For example...
The Case/Shiller housing index has shown home prices in major markets are down for the fourth month in a row. Prices are still very high, which is an important source of investable assets, but they are not creating worries about inflation.
Weekly job opening numbers have continued to fall. The number of job openings in the U.S. is what we would have expected to see in a normal bullish economy. Earlier this year, the job openings were sky high, which was a huge concern for investors worried about labor-driven inflation.
Hiring rates are still good but not spiking like they did last year. The ADP jobs report was released on Wednesday and showed the economy added 177,000 new jobs compared to 194,000 expected. This is still a good hiring pace, but not so fast as to worry the Fed about inflation.
We don't know yet what the PCE inflation report or the official jobs report from the BLS will be on Thursday and Friday (this update was written after market close on Wednesday, Aug. 30), but it looks like we may be settling into a sweet spot for traders where the news is good, but not too good.
As we saw two weeks ago, the advantage we have right now is that there are a lot of good stocks just coming up off support. As the Predictive Alpha A.I. surfaces those opportunities, we should see profit targets continue to increase...
In the video below, we walk you through what is happening on Wall Street and how each of the new trades we will be taking in the Predictive Alpha portfolio are likely to perform. (10:32 min. watch)
Each week, we will update you on our open trades, organized by their initial "target price" date.
To be clear, these trades are straight stock buys; we will not pursue any options trades in this service.
Predictive Alpha's unique A.I. system allows it to predict, with astonishing accuracy, where a security will move over the next month (or, to be more specific, the next 21 trading days).
Because this A.I. is so sensitive and updates its predictions every single day, a predicted target price may change from one day to the next.
We watch those changes carefully and will alert you when we think an exit is optimal.
The current one-month target price for FHN is still very positive, which aligns with our view that the regional banking sector is undervalued.
We still have flexibility before the stock reaches its target date, but we will keep an eye on market conditions for any opportunities for an early exit.
The one-month target for TLT is attractive, and we think the lower level of volatility associated with bond funds will help this trade if market conditions get a little choppy again.
TradeSmith is not registered as an investment adviser and operates under the publishers' exemption of the Investment Advisers Act of 1940. The investments and strategies discussed in TradeSmith's content do not constitute personalized investment advice. Any trading or investment decisions you take are in reliance on your own analysis and judgment and not in reliance on TradeSmith. There are risks inherent in investing and past investment performance is not indicative of future results.
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