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A Strong Finish

December 6, 2016, 4:31 pm

If you’re like me, you find it hard to believe that on the one hand we’re already in December, but on the other hand it has been less than a month since the election became a defining moment. November started with Wall Street braced for political apocalypse and ended with a breathtaking 40% of all stocks trading within 10% of their 52-week highs. Just as important – if not more so – is the sense that even better performance is coming.

Rotation remains the name of the game right now. We’re seeing technology stocks under pressure while the financials prosper on the prospect of higher interest rates ahead, but that balance shifts day to day. Likewise, oil prices and related stocks had a great week, while biotech stocks are floundering. What does one have to do with the other? That’s been the way money has rotated recently – the “algo” as it is often called on the Street, short for algorithm. Big money has been selling biotech to buy into energy.

As we look toward the end of the year, the environment favors stocks in general, so the rotation we’re seeing is constructive instead of an empty churn. Traders now have earnings on their side for the first time in years. That translates into a tailwind for the market as a whole, lifting strength and weakness alike as money moves off the sidelines. Early signals from the incoming Trump administration indicate a corporate-friendly year coming up, which should also help keep cash flowing through the market and into our pockets.

We also have a market and an economy that seem comfortable with an interest rate increase, unlike a year ago at this time. The November employment report was solid. There were some concerns down in the details, but the 178,000 jobs created last month ought to be enough for the Federal Reserve to raise rates when it meets next week.

The overall trade thesis on Wall Street right now is for bigger economic growth, which is why the market can even contemplate a rate hike without buckling. We saw evidence of that last week with Caterpillar (CAT), the heavyweight in construction and mining equipment. Management said that Wall Street’s expectations are too high – the stock was even halted at the time – but shares finished the day higher anyway.

That’s almost a boom mentality. A lot of investors may not remember what a boom feels like – and those who started investing in the post-2008 lull may never have experienced it – but I remember. And I remember how much fun it is to trade it. One of the many nice things about that kind of environment is that investors have more freedom to hold on to winners for bigger gains.

With earnings growth likely to fire on all cylinders next year, institutional investors will want to buy stocks now while they can, so traders will have more money flow, trends and rotation to capitalize on.

A Closer Look at the Market’s Strength

December 2, 2016, 4:33 pm

The market closed out November riding all-time highs and yet the feeling amongst individual investors and Wall Street professionals alike is one of angst. It doesn’t seem to matter if they’re bullish, bearish or neutral – I’m seeing plenty of folks on edge.

There are those who wanted to avoid the market until after the election and now are anxious they may be too late to the party (a big reason I’ve been pounding the table for months on staying invested). On the flip side, there are investors who are in stocks and benefited from the post-election climb, but they don’t quite trust the rally and are waiting for the other shoe to drop. And finally, there’s a third group that encompasses the worst characteristics of the other two – folks who have stayed in cash (missing the post-election rally) and choose to remain that way because they do not believe there is strength in this market.

All three groups have one thing in common – they don’t understand what’s really driving this market right now. Even with two corrections in the last 15 months, the charts have been bullish for years now and all of the major indices currently trade near all-time highs. The fundamentals have been suspect because we’ve had to deal with negative earnings growth, a negative GDP, inconsistent jobs numbers and more. But that has all changed in the last few months as the economic numbers are improving and the positive third-quarter earnings growth for the first time in a year shows underlying strength.

The most recent third-quarter GDP reading was revised higher to 3.2%, well above where most analysts would have predicted. There will always be the naysayers who can rip that number apart, but the fact is that the United States grew at a solid pace last quarter and appears to be on track for another strong quarter to end the year. Remember, a recession is by definition two consecutive quarters of negative growth, and looking toward the future we can see absolutely nothing that would lead to even one in the next year. Of course there is always the off chance of a black swan event, but that’s a risk we undertake every day and would be unavoidable.

For now, the economy has a lot working in its favor. Housing numbers, both existing and new, have recently come in at levels not seen in years thanks to an increase in first-time homebuyers led by the millennials. Considering the millennials are the largest demographic in the country, a continued shift in family formation and home buying should be a huge boost to the sector and overall economy. Even November’s jobs report was promising, with the unemployment rate at a historical low.

I could keep rattling off more examples of data improvement for hours, but the bottom line is simply this: The foundation of the U.S. economy is solid and the odds of a recession or steep correction are very low heading into 2017. Add in the possibility of lower regulation and taxes for both corporations and individuals as a result of the incoming Trump administration and that foundation gets even stronger. I believe this strength will lead to a profitable investment environment for us and I look forward to the opportunities ahead!

Calling All Bulls!

November 14, 2016, 4:29 pm

Very few things about the last week haven’t been surprising. First, Donald Trump defeated Hillary Clinton to become the next president of the United States. Then, the market rallied all week on the news. Even those few who had predicted Trump would win the historic election didn’t expect stocks to be higher the following days.

Those of you who were watching the futures market on election night saw the Dow drop over 800 points, and it appeared that there would be a bloodbath for investors on Wednesday. But lo and behold, by the end of last week, the Dow had hit a new record high.

That action tells me that investors were more concerned about moving beyond the election than finding out who the actual victor would be. Of course, the unknowns surrounding a Trump presidency are still something the market will need to contend with, but as I had anticipated (although it certainly occurred much sooner than expected), stocks are finally getting back to work.

A strong focus on the underlying strength of the economy and corporate America gives investors plenty of reasons to buy stocks right now more than any other asset class, and I remain bullish on the market in both the near and long term. It won’t be a straight shot up – it never is – but let’s talk about some of the reasons why I expect stocks to hit more new highs in the coming months.

Interest Rates: Given the results of the election, the Federal Reserve will need to be cautious when it comes to hiking rates in the next year. A new party in the White House could lead to more dovish monetary policy, but putting a lid on interest rates for now would certainly be bullish for stocks.

The Dollar: The U.S. Dollar Index was up big on Wednesday and is now trading close to an eight-month high. A strong currency is great for a country, but if it gets too strong it can negatively impact earnings of domestic-based multinational companies. As a result, I suspect the greenback’s upside is limited, which would remove any headwinds that appreciation in the currency could cause.

Taxes & Regulation: If Trump follows through on his campaign talking points, we could see less regulation and lower taxes for corporations as well as individuals. Both are a huge win for the stock market and are also a big reason why the financials are rallying post-election. The group as a whole is at its best level since 2008, and individual names such as JPMorgan Chase (JPM) hit new all-time highs. Bank of America (BAC) hit a high today that it hasn’t seen since 2008!  A broad market rally could easily be led by the financials as they continue their breakout.

The End of Obamacare: It’s no secret that one of Trump’s main goals is to repeal Obamacare, and hospital stocks are taking a beating as a result. The hospitals have been huge beneficiaries of the Affordable Care Act, and if it ceases to exist it could be bad for the sector. However, considering health insurance premiums have been increasing at a rapid pace, the repeal could be a boon for small businesses as well as larger corporations. In the end, getting rid of Obamacare would be good for the economy.

Global Trade: This is my biggest fear about a Trump administration. All of his tough talk about trading with China and other countries helped him get elected, but his ability to actually do what he stated has yet to be seen. We expect the anti-trade rhetoric will soften in the coming months and that Trump will have to bend when it comes to his stance on trade, which would remove a big issue that has the potential to lead to a recession in the years ahead.

Pent Up Demand for Stocks: Heading into the week, the large hedge funds were sitting with 5.8% of their portfolios in cash, the highest level since 2001. That was fine with the election on the horizon, but now these funds need to earn their pay and put that money to work. They’ll be looking to put that money into the best asset class, which remains equities, so stocks should benefit nicely from money moving off the sidelines and back into the market. Trillions of dollars are ready to be deployed.

Republican Control: Contrary to what many believe, the market actually performs quite well when one party has control of the White House, Senate and House of Representatives. In fact, the stats show that two years after a new president takes office, a one-party government is the best set-up for stocks.

Presidential Figurehead: While the president is technically considered the most powerful person in the world, when all is said and done he is not a monarch. The checks and balances that our founding fathers created were designed to prevent that, and our system allows us to determine the strength of our country by an entire group of people. Sure, Trump will pick the majority of them, but I am confident that his team will put the United States on the right path.

Some of these factors will play out quickly while others will take time, and that’s okay. It’s good to have catalysts in place that have the potential to move the market in both the short and long term. And often times, those longer-term catalysts are actually the ones moving stocks today. By the time they come to fruition, the move has already been made.

There are plenty of underlying catalysts driving the market to new highs, and your goal should be to position yourself to take advantage of any breakouts that may happen along the way.

Clarity in Sight

November 8, 2016, 4:33 pm

Presidential elections are often a weight on stocks, but this one has been an unusually heavy load. It’s not that the market tanked, but it was stuck in a tight trading range for nearly three months and has slipped the last two weeks as pre-election anxiety increased. It’s been a long and eventful political season, but one way or another, the shadow should be well on its way to passing less than 24 hours from now.

At some point tonight or early Wednesday, we should know how the votes played out. Given the nature of this campaign, it’s a little hard to tell what the market’s immediate reaction will be, but I do think Wall Street will feel that a big burden has been lifted. I also think we will see that reflected in trading through year-end.

Amid all of the election hoopla, the fundamentals for a rally have been setting up quietly backstage. Last Friday’s job creation numbers proved once again that the consumer sector keeps spinning out both paid positions and even showed the strongest wage inflation since the 2008 crash. Americans are not getting laid off in vast numbers, and we’re collectively getting a little more money to spend.

Meanwhile, corporate profits have been more resilient than many expected. Chances are better with each passing week that we will see earnings growth this reporting season for the first time in five quarters. Sprawling enterprises like Williams Companies (WMB), Pioneer Natural Resources (PXD) and Advanced Micro Devices (AMD) that were bleeding cash a year ago are now back in the green. I think we’ll see names like these lead the way.

It’s important to remember that sentiment circles around and can change on sometimes crazy headlines, but the fundamentals always anchor the action. When the mood turns, established strength usually recovers fastest, and that’s where you want to be.

The fundamentals were also what the Federal Reserve was watching last week when it hinted that interest rates will be raised soon, most likely next month. The economy has finally passed all the Fed’s tests: unemployment is low enough to qualify as “full employment,” gross domestic product (GDP) is on the rise and now that oil prices are higher – even with the recent pullback – inflation needs to be kept in check.

Behind all the headlines and chatter in the coming days, that’s the pulse I want you to follow. Eight years after the financial crisis and recession, the Fed finally sees the economic risk tilting from stagnation to inflation. It takes a healthy economy to generate enough inflation to force the Fed to raise rates. A healthy economy feeds back into corporate activity, driving profit growth.

For the fourth quarter, Wall Street is anticipating the small increase in earnings we’re seeing now will turn into 4.6% expansion. When 2017 rolls around, rebounding energy companies, banks basking in a more supportive rate environment and just about every other corner of the market should contribute to double-digit growth for the first time in years.

 

We made it to Election Day!

November 8, 2016, 6:00 am

There’s no question it’s been a rough road to get here — we like to call it “the storm before the calm” — and we applaud you for sticking through it. We truly believe that those who have stayed invested will be rewarded once the votes are counted and clarity (and even some sanity) returns to Wall Street.

We also hope that you’ve enjoyed this special election series. As we said in our first bulletin, it’s our goal to help you navigate the volatility and come out of this election with a stronger portfolio that’s positioned for profits well into 2017.

Here’s a quick look at the 2016 Election Bulletin series in case you missed anything:

Making Money No Matter Who Wins

A lot of investors feel powerless against the volatility this election has created, but Matt and I are here to help. Get the peace of mind to know you can still make money no matter what the stock market does before or after November 8.

Will This Vote Follow the Historical Trend?

Let’s talk about what history can tell us about what’s ahead for the market. Even going back decades, a surprising pattern has emerged when it comes to stock performance… The winner of the presidency doesn’t really matter and here’s why.

Non-Partisan Sectors Ready to Move

In this article, Matt and I examine the sectors that are well-positioned to perform under either candidate. It may be hard to believe that such sectors exist given the nature of this campaign, but it’s true.

2016 Election Profits Bulletin: Our Top Picks

With select sectors ready to do well regardless of who wins on Tuesday, now is the time to position your portfolio to profit from any post-election bounces. In this bulletin, we’ll dive deeper into our top picks — both stocks and ETFs — that we expect to outperform.

But we’re not stopping just because it’s November 8! We are committed to seeing you through the post-election market environment. We’ll continue to be in touch with updates on the latest market action and strategies on taking advantage of the opportunities that emerge. And don’t forget, it all culminates on November 16 at 2pm ET with our exciting live event called: 2017 Market Outlook: Back to Basics.

So stay tuned for our next bulletin and an official invitation to our special event!

BOO! Taking the Fear Out of Options Trading

October 31, 2016, 2:05 pm

Individual investing on its own can be a nerve-wracking experience—but toss options into the mix and even experienced investors will go running for the hills. That’s unfortunate because they’re such a great trading vehicle to make more money, and they don’t have to be scary. So this Halloween I wanted to quell some of that fear and break down how to keep your money safe when diving into the fast-paced world of options trading.

Because options are highly leveraged investments, they move very quickly. Options pricing, unlike stocks, can change by significant percentages in minutes or seconds rather than hours or days. Small movements in a stock can translate into big movements in the underlying options.

As a result, options trading carries bigger risk – but also bigger reward potential. At the same time, you can significantly minimize the risk on a variety of levels. For instance, when it comes to the options themselves, you can buy those that are cheaper (they have less “premium” in the price) or “in the money.” I won’t go into the details here, but these are two factors in buying options that can be adjusted to lower risk and volatility while keeping reward potential.

In addition, some investors look for quick in-and-out trades that can be executed in just a day or two. If you get a quick pop in a position, you can jump on that momentum and lock it in. You can use this strategy to limit losses as well, quickly moving on if a trade does not work in your favor.

For some people, when they have a solid gain in a position (say, 50%), they are tempted to continue holding the option in hopes it will continue climbing higher.

Even if there are specific catalysts in place to support this line of thinking, it can be dangerous putting your profits at risk for a fall. Unless the underlying long-term stock trend is strong, it can be a good strategy to take your gains when you have them. After all, it’s better to secure your money and leave some on the table rather than lose everything should an option turn against you. And remember, you can always re-enter a trade later.

Another good way to limit risk and make options less scary is through limit orders. If you’re not immediately able to buy or sell at the desired price you can set a limit order. That way, your order will automatically execute when the option moves back (as they often do). In this way, limit orders are a bit like airbags—if you’re watching closely, you won’t have to use them, but they’re still there to protect you on the rare occasion you get blindsided by a crash.

In regards to money management, a good rule of thumb is to have options account for no more than 5% of your total liquid portfolio. The number you allocate for each options trade can vary based on the size of your portfolio, but a general guideline would entail about 1%-3% of your 5% options portfolio in a trade.

However, you would likely need to have a minimum of $1,000 in each trade or the commission fees can start to eat into it too much. So if you had a $500,000 portfolio, $25,000 would be allocated to options and $1,000 (4%) could be managed for each trade. Although this is slightly above the 1%-3% range, at most, you would lose 0.2% of capital in each trade.

See? There’s nothing to be scared of! Options can be an exciting way to make money. The leverage they offer make quick, double-digit returns a real possibility on a regular basis. Those profits can sour like a jack o’lantern past its prime if you’re not careful about risk management—but play your portfolio with caution and your options can turn into solid winners in the blink of an eye.

Earnings and the Economy

October 28, 2016, 3:10 pm

It looks like we may get that better-than-expected earnings season after all. According to Thompson Reuters, since 1994 only 63.5% of all companies report results that best expectations while 21% miss. This quarter’s trend is off to a great start, and if it continues the odds of the five-quarter negative growth streak being broken are high.

All of this goes back to the economy. As I’ve said for some time now, the United States economy isn’t great, but it also isn’t terrible. The scientific term would be “okay.” While that may not sound good, a mediocre economy is actually an advantageous thing for investors because it allows U.S. corporations to make money while at the same time keeps inflation in check and prevents the Federal Reserve from being aggressive in the next year. That combination of decent valuations, extremely low interest rates and an accommodative Fed should lead to higher stock prices in 2017.

Inflation remains where the central bank wants it and there is no rush to raise rates in order to control the increase in prices. In addition, the Fed mentioned that it could let the economy get “hot” in the coming months, which suggests it would be okay with inflation above the target 2%. If that’s the case and unless inflation really picks up in the next month, we may not see a rate hike come December.

Plus, according to Bank of America Merrill Lynch, hedge fund managers are currently sitting with an average 5.8% of their portfolios in cash. That’s a level that has only been matched once since November 2001 – just months after the September 11 terrorist attack – and that was earlier this year after the Brexit vote shocked the world.

The good news is that cash levels above 4.5% are a buy signal because of the contrarian qualities. There are two ways to think about it. The first is that there is a lot – and I mean a lot – of money on the sidelines, and when it starts pouring back into the market it will increase buying and spur a rally. The second is that when everyone is on one side of a trade they are usually wrong. Fund managers are underperforming the major indices again this year and we suspect the main reason is those large cash positions.

To give some insight into the last two times cash levels were this high, let’s look at how the S&P 500 performed in the three months following each instance. The index climbed 4.1% after cash positions peaked in November 2001, and following the Brexit it popped 2.4%. Both gains are well above the annualized return the S&P 500 has seen the last few decades. Assuming history repeats itself, this is just another reason I remain bullish on the market.

It’s important to understand that if you’re feeling uncertain about the market you’re not the only one – even experienced managers of billions of dollars are in the same boat. But that’s no reason to let your money sit on the sidelines. Stay observant and proactive and your money will continue to work for you no matter what the broader market environment looks like.

Election Playbook

October 25, 2016, 2:15 pm

We are just two weeks away from the presidential election and I’m already seeing opportunities beginning to brew. I wanted to take some time today to examine how certain areas of the market will perform under either candidate and how investors can play the resulting action with exchange-traded funds (ETFs).

Healthcare: The belief here is that a Hillary Clinton win would add more pressure to the sector (specifically pharmaceutical and biotech stocks). She has been very adamant about her view on a few specific drug pricing situations, most recently with Mylan (MYL) and the pricing of its EpiPen product. Her comments, along with others in the political circle, have hurt the stock and reverberated throughout the sector. Biotech stocks by default have been brought down by the comments and the IBB is now trading at just $265 – one of the lowest levels in recent years. A Clinton victory could have an initial negative effect on the sector, but at the end of the day the attractive valuations, the continued breakthroughs in the development of life-saving drugs and the fact not much will change for the sector will all lead to a great buying opportunity.

A Donald Trump win in November would likely result in an immediate relief rally for the sector and the buying should remain as the Clinton black cloud is removed. Either way, we could see a return to momentum that would be an attractive play in the coming weeks.

Aerospace & Defense: This is a sector that will likely do well regardless of which candidate is victorious in the election. Trump has already talked about his ambitions to strengthen the military, which should help some of the big names in the sector that make up the related ETFs. A Clinton win will not hurt the sector and could also supply a little boost. (Regardless of what she says while campaigning, her budget cuts to defense spending are not likely.)

Infrastructure: This is another area that stands to benefit from either a Republican or Democrat victory as both candidates plan to increase spending on upgrading the infrastructure system throughout the country. Clinton and Trump may not agree as to why spending should increase on infrastructure, but the end result would be government money going to the improvement of everything from roads to municipal water projects. For the last decade, the American Association of Civil Engineers has rated U.S. infrastructure and consistently gives it a failing grade. There are hundreds of billions of dollars needed to fix a deteriorating system and both candidates should be ready to spend to not only facilitate the needed upgrades, but to also create jobs.

Precious Metals: One of the catalysts that typically drives precious metal stocks higher is uncertainty. Right now there is a lot of uncertainty surrounding the stock market and the election is one of the biggest factors. However, this has not led gold and silver higher; in fact, the sector has been one of the worst performers in the last month with SPDR Gold Shares (GLD) down over 5%.

Once the election uncertainty is behind us, there will still be questions as to how the winner will impact the sector. That would be less of an issue with a Clinton victory (the Federal Reserve’s potential year-end rate hike would be bigger), but a Trump win could give the industry a boost as investors try to figure out what the wildcard candidate will actually do in the next four years. With no clear direction for the sector based on the election and the possibility of a Fed move in December, it could create a ceiling in the price of gold. That being said, I feel that a lot of the potential bad news has been priced into the precious metals and we could see a buying opportunity by the election.

Alternative Energy: A Clinton victory would be a positive for the “greenies” in the country as well as the alternative energy ETFs. You have a lot of options here: there are niche ETFs that focus on areas such as solar energy and wind energy, but there are also more general alternative energy options. While the sector has not done well this year, it could be the result of oil staying below $50 a barrel until recently. With oil prices historically low it makes alternative energy more expensive in comparison to traditional fossil fuels. If Trump is elected, expect the sector to take a short-term hit on the win, but longer-term the sector will be dependent on the price of oil.

Coal: A Clinton victory may be the death blow to an already struggling sector. The Obama administration single-handedly attempted to put an end to the coal industry and has done some major damage. Several big name coal stocks went bankrupt under Obama’s watch and Clinton will keep her foot on the gas. That being said, the VanEck Vectors Coal ETF (KOL) is up over 100% this year and is one of the best performing ETFs in the entire universe. A Trump victory would be great for the sector as he has vowed to save it. Expect KOL to move big the week of the election.

The Fed in the Wings

October 21, 2016, 12:57 pm

The Federal Reserve’s next move is at the top of investors’ watch list right now. While the central bank could throw an interest rate wrench into the calculations before the election, it’s highly unlikely. Wall Street sets the chances of action during the Fed’s November 1-2 meeting at below 10% simply because it hasn’t happened in an election year since 1980, and it would take a whole lot of inflation over the next week and a half to force Chair Janet Yellen’s hand.

Instead, it’s more likely the can will be kicked until the final meeting of 2016 on December 14 – a full year after the initial tightening move that wracked the market. I think the first hike hurt simply because the math was less certain after the better part of a decade with interest rates effectively at zero. After all, we didn’t exactly know what unexpected challenges a move up from zero could create for the yield curve a year ago. But investors can more readily figure out what a hike from 0.25% to 0.5% means for interest rates. And even then, we know rates are going to stay at historically-low levels for some time to come.

Right now it’s close to a coin flip whether an increase will come in December, so that represents additional uncertainty for risk-averse investors. If we have better clarity as we approach December, look for winners and losers to emerge as Wall Street gets ahead of the Fed. Banks and brokerage stocks will rise or falter. Debt-laden companies and stocks like utilities that compete with bonds will go the other direction.

But December is a long way away and we’ll be seeing a lot of economic data between now and then. By the time the quarter is winding down, I think we’ll see the markets rallying in relief over decent earnings and an election that we all realize we can survive.

An average year on Wall Street gives stock investors about 8%-11%, which is a number we actually haven’t seen in some time. “Average” would feel really good and we’re already halfway there for 2016. Earnings season has already gotten off to a relatively smooth start, so we could see a decent rally as the risks lessen.

After all, stocks aren’t at historically unsustainable valuations yet. We’ve come as far as we have on sentiment so guarded it practically passes for cynicism. A little hope would be a boost, and it could come from the economic data, corporate results or a new mood in Washington. However it plays out, it will be an interesting finish to 2016.

Now Is the Time to Get Ready

October 18, 2016, 8:40 am

A soft start to earnings season, a vicious political week and a deeply divided Federal Reserve have fed a lot of chatter about stocks running out of steam. And sure enough, the market moved in yet another near-circle last week, taking five days to end a fraction below where it started. Even with intraday volatility picking up, the S&P 500 hasn’t broken out of a tight 3.7% range once in the last 14 weeks.

You know the factors that have been holding the big benchmark back. There is plenty of angst circulating around the election, now just a little over three weeks away. There is the ever-present question of when the Fed will raise interest rates again and whether they will be too soon or too late. Recent earnings announcements and preannouncements have sparked the equally ever-present questions about the strength of the global economy.

There is no doubt that the lack of direction these last few months has been frustrating. No clear trends have also made it harder for some investors to generate a steady stream of profitable trades. So I just wanted to emphasize to all investors that you need to be patient just a little bit longer. We may need to get through the next few weeks of earnings and the increasingly unbelievable presidential election before we see real movement. The market hates uncertainty, and a lot of it will be resolved in the next three weeks. That would leave the Fed in December as a question mark, but I believe the market is better prepared for a quarter of a point rate increase this year, and I don’t expect that decision to weigh on the indices the way it did a year ago.

In the meantime, while the directionless market has been frustrating on one level, it also means that Wall Street is hanging in there. The S&P 500’s high from last year was 2,135, and it broke above that level in July of this year. Since the breakout, 2,119 was the lowest it had traded prior to last week’s dip to 2,114. As long as the S&P can continue closing above that lower end of its current range, my outlook will remain bullish in both the short and long term.

A breach could send the index down to its 200-day moving average at 2,068, which is actually not terrible either – just a 5.7% drop from all-time highs. That’s not a horrible market, contrary to what you might hear in the financial media. The noise is out of control right now.

The headlines would have you believe we’re in the midst of a bear market or correction. But in reality, the S&P 500 is above short-term support and trading just a couple of percentage points below an all-time closing high. That’s a solid base for a rally as we get into the seasonally-strong time of the year. The election will finally be behind us and the market will start looking ahead to improved earnings expectations for 2017.

I see a lot of great set-ups coming between now and the end of the year. Given how the indices are acting, your highest priority right now is to be disciplined on cutting dead money so that you have the flexibility to jump on the best-acting names when they start to move.