Last week, ETF Stocks wrote about the NASDAQ moving beyond the straight edge of a bullish right angle triangle. On Monday and Tuesday, stocks continued to roll with momentum to cycle highs.
Stocks moderated and flattened out to end the week, which is not uncommon following a nice move higher. However, the pause was accompanied by a fall in volume, which can be interpreted in one of two ways:
- Investors expect stocks to rise and are unwilling to sell, or;
- Buyers are hoping for a mild correction to buy the dip.
We believe the Dow and S&P are likely to move towards their 2012 peaks, and the NASDAQ could travel to 3050ish, maybe a few points higher before sellers try to turn the index back. In fact, minus some unforeseen catastrophe, ETF Stocks believes the odds of a full-blown sell off are minimal at the moment.
It’s our view that Wall Street will takes stocks higher heading into the next FOMC meeting September 11th and 12th. We’ve read that $1 trillion in easing has been priced into stocks, and many brokers, such as Goldman Sachs, believe QE3 is a done deal in month number 9. We aren’t so sure.
What we are sure of is that earnings and profit growth are slowing. With nine out of ten S&P 500 companies reporting, revenues are up 3.89% and as reported earnings a small 0.39%. For Q3, analysts expect profits to fall by 1.5% compared to the nearly completed quarter. Falling earnings per share typically means falling stock prices, too.
Investors might consider riding the wave while the trend lasts. As we mentioned, ETF Stocks expect the crest will occur sometime in mid-September. Between here and there, we might suggest taking advantage of dips by adding market leaders like Google Inc. (GOOG), Amazon Inc. (AMZN), Apple Inc. (AAPL), Biogen Idec Inc. (BIIB), Fossil, Inc. (FOSL) and some of your favorites.
If individual stocks aren’t your thing, then just hook up with an index exchange traded funds like PowerShares QQQ (QQQ) or SPDR S&P 500 (SPY) as ETF stocks sees another 2-3% potential during the current rally.
You might get the chance to buy the dip early this week as our momentum model shows some weakness carrying over form last week, but we feel it could be short lived. We wish there was more to it this week, but that’s it. We’ll have more to discuss next week as a few major economic reports are on tap this week.
The announcement we will be watching the most is Tuesday’s Retail Sales report – fingers crossed that the folks opened their wallets in July.