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Looking for Opportunity

June 12, 2018, 10:09 am

Last Monday, the NASDAQ matched its all-time closing high and signaled that the negativity around Big Tech over the last few months has pretty much evaporated. It’s clear that the sector has been a favorite throughout Wall Street.

However, the broader market remains 2% from record territory, and when you factor out tech, the S&P 500 is actually still down year to date, with most sectors from industrials to financials also lower. From utilities to the consumer, wide swathes of Wall Street are still a long way from recovering from the February correction.

The good news is that leadership is tentatively broadening out to other corners of the market like the banks and even real estate, opening up new opportunities. I expect to start buying more once we get a little more confirmation that money is indeed flowing beyond Big Tech.

We’re in the early stages of that now, but many charts still look rich even though the best earnings season since 2010 opened up a lot of upside for stocks to chase – even stocks already at record prices. A full 38% of stocks are back within 10% of their 52-week highs, and I would be reluctant to trade those names until we see proof that they can push through those known limits and make us real money.

I’m keeping an eye on a few things this week. In terms of the market, the S&P 500 is not far from 2,800 again, which is where it topped out in mid-March and hasn’t been back to since. A break above could be significant.

In addition, there are a few events on the calendar that are big enough to move stocks, so we’ll have to stay on our toes. The first is President Trump’s meeting with North Korean President Kim Jong Un, which took place overnight in Singapore. The market opened higher after the two signed an agreement that highlighted the denuclearization of the Korean peninsula, and I’ll be watching the action throughout the day to see if anything else major is announced.

In addition, the Federal Reserve Open Market Committee holds its fourth meeting of the year and the third under new Chair Jerome Powell. We’ll get the Fed’s latest decision on interest rates, and the market is pricing in a 95% chance of another increase. There has also been more talk in recent days that the unwinding of the Fed’s balance sheet could be coming to an end, and Powell will hold a press conference to hopefully discuss that afterward. Stocks could move on any or all of those factors.

I will be watching all of it closely, and while we haven’t gotten as many favorable set-ups as we would like in the last week or so, I’m watching several stocks that are trading constructively and could soon give us attractive entries.

In the end, I continue to expect this to be an exciting summer for us. You certainly won’t find the summer doldrums here!

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