How to Profit From this Rally
The market moved
higher again yesterday. It seems like every morning article begins this
way, and each likely has for the the past five months. The rally which
began in August has slowly moved higher nearly every single day. It's
truly been an amazing few months.
Contrary to popular belief, investing in a trend like that can be
difficult. One wouldn't think so because the market only moves in one
direction, but it's hard. The bothersome part about trading a rally like
this is that every day looks like it should pull back but it
doesn't.
Literally, for the past three months, I could have said "that was a
top." But the market moved higher - and I also never called for a
top.
Instead we have remained exclusively long
weighted, but on occasion took in bearish hedges. It wasn't that I wanted
to go bullish. Rather, the bears were so pathetic on the ride up, and
they waste every chance they are given to take the market lower. Why
would I want to trade on the same side as the losers. The bears time will
come, but I recommend staying bullish until sellers prove they can do
more than a 1% intraday decline.
I am not a bear, not even close, but
I know how quickly gains can evaporate in this difficult rally. In the
spirit of taking gains (before that position is a loss) I recommended
selling our all-star position of ALJ. It is the second 50% gain in as
many weeks - and I hope many of you put that reward towards your
valentine.
There is some big economic news coming up this week. But I am
reluctant to go into it because quite honestly, the market doesn't care
about it. I will say this much, 70% of reported companies last quarter
beat analyst estimates. Many of those beats were also from higher than
expected sales. Top line growth has been a missing component to the
rally, but last quarter we encountered better revenue growth.
But many companies also decreased forward estimates to account for
higher costs in production because of increased energy and basic material
prices. That sounds like inflation to me. And remember Ben Bernanke says
we do not have inflation. This week's CPI and PPI numbers may tell a far
different story. Be careful over the next two days, the dollar wants to
make a big move and the inflation data could give it the juice it
desperately needs. Of course, a strong move for the dollar would have
equally drastic consequences for commodities.
Watch
List
The TradeMaster Daily
Stock Alerts watch list is
bullish again. For a full list of our trades and video of our current
stock watch list CLICK.
