Put two traders in a room, and one might scream to sell while the other puts in orders to buy. So who’s right? Well, they both could be—depending on the indicators they’re looking at and the kind of trading you want to do.
We’ve rounded up our InvestorPlace advisors to give you their read as the market prepares for a three-day weekend and we head into the last week of May.
Bullish but Individual Sectors Showing Some Wear and Tear
We’ve been clear that not all sectors are performing equally in this market, so while overall the market is still very bullish, we are getting slightly concerned that some stocks are getting a little overbought, particularly in the retail sector.
One area we do like right now is oil. The entire oil sector is starting to look a little stronger as growth expectations pick up. From a sector-rotation perspective, this is about the right time for that to happen and should help support the current rally.
Jon Markman, Trader’s Advantage and CounterPoint Options
Stocks are likely still in the early stages of discounting a turn higher in the markets. Even though they are up a bit more than 100% from their 2009 lows, the top of the bull market could see the S&P 500 up as much as 200% or 300% from those lows in the years to come, as long as current monetary policymakers retain their positions of power and continue their efforts to boost confidence and risk-taking work out.
Sure there are many problems today, including high unemployment and underemployment. But there are many pluses too. One that is not given enough credit is paradoxically the slowdown in China, which is keeping energy prices low enough to push down inflation — which in turn has the effect of allowing for rising price/earnings multiples. Rising P/E multiples are the hidden lever behind all major market moves, and this is happening before our eyes.
Ken Trester, Maximum Options
For now, our indicators are giving bullish readings, unchanged from last week. As they have been throughout the current rally, all eyes have been on the Fed again this week. If there was ever any doubt about who or what is leading this bull market higher, those doubts have been removed. Stocks are moving on Fed doings and sayings, period.
By the numbers, U.S. stock indices will continue to be bullish as long as the Dow is above 14,810, the S&P 500 above 1595, and the Nasdaq above 3335.
John Lansing, Parabolic Options, Trading at the Open, and Trending123
There’s essentially been one trade that’s been going on — a massive carry trade that involves the dollar, which is fluttering back and forth around new 52-week highs. At the same time, the stock market is also ramping to new high after new high in lock step with the dollar.
Traders continue to “close their eyes and buy the highs,” but I’m still largely in cash and focusing on currency trades. With the CBOE Volatility Index below the 15 level, buying options isn’t ideal. This is an environment where option writers will do better.
Don’t wait another minute…you only have 72 hours left to SAVE 50% off your Trader’s Advantage, Maximum Options, Slingshot Trader, Trending 123, Parabolic Options subscriptions and more. We hope that you will take advantage of this generous offer before the weekend is over.
This amazing half-off discount is our way of expressing our gratitude for your business, and for sharing our excitement for the profits that lie ahead as we come through one of the most remarkable investing periods in a generation. This offer is only good through Monday, May 27. Full details available here.