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Pro Panel: Strategies for a Mixed Market

Our advisors waded through conflicting data points so you don't have to


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 of the market.

markman-mild-bullBullish on Smaller U.S. Stocks

Jon Markman, Trader’s Advantage and CounterPoint Options

Stocks sauntered higher again on Thursday, led by small-caps and tech, in a day marked by marveling that Facebook (FB) finally appeared to have its act together as a company and a late-day surge on rumors that the Fed would announce intentions to stay looser than currently expected.

It’s counterintuitive, but as the U.S. economy is leading the world,  you want to avoid large, multinational companies. The reason: Larger stocks tend to have a more global footprint, and they are being hampered by the recession in Europe and slowdown in China. So it should not be surprising that indexes on the smaller end of the spectrum are outperforming in the current backdrop of stronger U.S. growth, as shown in the chart above. There has been a clear relationship between size and returns in 2013, even within each index.

The bottom line for us is to continue to focus much more on smaller, U.S.-focused companies like SAIC (SAI), Sun Edison (SUNE), Cabot Oil & Gas (COG) and the regional banks this summer — and not the bigger companies. However, you should always make sure that any smaller stocks you’re looking at trade in high enough volume so that liquidity is not an issue.

slingshot-neutralMarket Shying From the 1700 Level

John Jagerson and Wade Hansen, Slingshot Trader

We have a market that continues to push up higher and higher, though we did see two down days in a row Tuesday and Wednesday. The last time that happened was in mid-June. Since that time we’ve only seen a handful of down days, but it’s actually not that surprising as we approach the psychologically important 1700 resistance level in the S&P 500.

Though we’ve seen some great results from Facebook and Ford (FB) this week, in the midst of several earnings announcements that are either in-line with expectations or below expectations — Netflix‘s (NFLX) announcement that their subscriber growth is slowing, for example — it’s time to change tack to a more neutral, balanced approach rather than chasing the bull.

trester-mild-bullCautiously Bullish

Ken Trester, Maximum Options

Our index indicators continue to give bullish readings, unchanged from a week ago. Though the upward momentum has slowed over the past week, the major indexes remain comfortably in bullish territory relative to their key moving averages. The bullish trend will remain in place as long as the Dow is above 15,200, the S&P 500 above 1640, and the Nasdaq above 3480. Those numbers represent the index’s 50-day moving averages. So although the majority of indexes remain bullish, one of our key internal indicators has given us pause. More on that in today’s Trade of the Day.

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