Market Rally Still Has Room To Run – Next Speedbump Is FOMC On 1/31
POSTED BY PETE STOLCERS ON JANUARY 23
Yesterday politicians extended the budget and the market shot higher. This news was widely expected and stocks were up significantly before the vote. This is a runaway train and you need to keep moving your stops up.
The budget will be an issue again in 17 days and the debt ceiling will need to be addressed as well. Politicians simply bought themselves some time. Many Democrats are disappointed that Schumer caved in and we can expect a real battle during the next round of talks. Both parties seem to be having constructive conversations and that is a good sign.
Earnings season is just starting to unfold and corporate guidance is off the charts. The tax bill will result in huge profits and companies are investing in plant and equipment. Valuations are not stretched.
Economic conditions globally are robust.
Interest rates in the US are low by historical standards. The Fed will hike three times this year and they might hike four times given investor confidence. They want rates to go back to normal levels and they can hike without worrying about a correction. The next meeting is a week from tomorrow and it could be a speed bump.
North Korea missile testing should be quiet during the Olympics. That gives us a month.
It’s not wise to buy stocks when they have gone parabolic, but this time is different. This is the largest tax bill we’ve seen in decades and it changes the landscape dramatically.
Swing traders should hang onto their calls – raise your stop to SPY $280 on a closing basis. We have been long for more than 100 S&P points and we will keep riding this wave.
Day traders need to look for relative strength and they need to buy compression breakouts using five-minute charts. We’ve been doing this in my chat room with great success.
This is not a blow-off rally in its final stages of a bull run. We are seeing the beginning of an economic boom. Stay long.
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