The stock market futzed around all day Monday and ended little-changed, which is a very positive reaction to the powerful surge seen at the end of last week. Bears could easily have jumped on the higher prices while bulls were feeling content and sassy, and instead they appeared to want no part of a new fight.
The session lacked any major catalysts, so investors were largely left to their own thoughts and murmurs.
Of course, there was a soupçon of news. The October ISM manufacturing data came in above consensus and suggests a faster expansion. Employment sub-index improved from prior month, and new orders were much stronger.
Overseas, the news agency Reuters reported that the European Central Bank will keep the terms of its super-cheap long-term loan program, known as TLTRO, unchanged. There had been some hope among market participants that the ECB would make the terms even cheaper, but those dreams appear to have been dashed.
From a structural point of view, the stock market now faces the best historical three-month stretch for equities: November through January. The S&P 500 has risen 3.4% on average for the November-January period, which is substantially higher than the average gain of 1.9% for three-month periods in general.
Sure, there are the usual reasons for caution, including slightly high valuations and continued strength in Treasuries and defensive stocks. Yet, you are now going to probably see a typical dash for performance among hedge funds that are trailing the market.
This means that if you had been standing aside from the stock market during the summer and early fall months, this is the time to get your money back to work — and here’s a bullish trade to get you started.
BitAuto Hldg Ltd (ADR) (BITA) is a vehicle information service in China. In Trader’s Advantage we traded it successfully on the short side in September; now it looks good to go on the long side after a rise and consolidation, as you can see in the six-month chart above with daily bars.
Buy BITA at current levels (around $82) for target $88.15.
Jon Markman operates the investment firm Markman Capital Insights. He also offers a daily trading advisory service, Trader’s Advantage, and CounterPoint Options, a service that helps individual traders make steady, consistent profits with volatility-related instruments.
