by Ian Harvey
August 17, 2017
The stock market bulls keep rolling along to the tune of all indices rallying after last week’s two nasty sell off sessions due to rising tensions with North Korea and/or profit taking excuses. This period of time also allowed investors to buy the dip in preparation for the rally to continue rolling………rolling………rolling.
Yesterday saw the Dow Jones Industrial Average (DJIA) manage to reach a fourth straight win, even as stocks pared their gains following the latest Fed meeting minutes.
The S&P 500 Index (SPX) reached a high for the week at 2,474.93, and is definitely on track to surpass the 2,500 that has been so elusive.
It appears that the shape of the stock market going forward has changed; the sell-off appears to have happened, and instead of the 2,500 mark as the destination, it is more than likely the breakout will occur above the 2,500 level.
There are plenty of reasons that the “Bull Rally” is on an upward trajectory, with record levels that are hard to ignore; and then it is very difficult, and probably foolish, to short the market against such strong numbers. This consistency and stability can be tied to several factors…………..
Low inflationary expectations in the market,
Expectations based on President Donald Trump's economic agenda moving forward eventually,
The level of “Euphoria” has not been achieved as yet, as can be realized by the lack of participation from retail investors in the stock market, and
There is no expiry date on a bull market – and may continue for years yet despite the fact that it’s already at fair value.
Consumers are shopping, showing that the economy may be stronger than expected. The July retail sales report had the best gain in seven months; and now, economists are raising GDP targets as a result of the stronger sales growth.
On top of that, low interest rates and slow inflation have combined to make those sales and profits worth more than most investors expected.
As well, the U.S. dollar has also weakened recently, benefiting U.S.-based companies with international business by making foreign earnings translate into more dollars stateside.
So, the scenario now is how to play the bull market at this point of time when the economy, interest rates, and earnings growth are tail winds – buy, buy, buy - and then wait until valuations are "out of control."
This then become the cash time, or in the case of Stock Options Made Easy, move into put options trades to “cover the dips”, and then be prepared to take on call options to “climb with the rips”.
What To Do Now…….
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