Stock markets surged more than 4% last week and have climbed nearly 15% this month. We all know this has been one of the best months for stocks in nearly 40 years. Where do we go now though and how should you position your portfolio? I think volatility will still be very prevalent -especially with the amount of “market moving” date this week so you had better be on your toes!
To put the current price levels in perspective, all 10 S&P 500 sectors are currently overbought (more than 1 standard deviation above their 50-day moving average). Moreover, 8 out of 10 are in extreme territory (more than 2 standard deviations above their 50-day moving average). These readings don’t last long.
Historically speaking, the average return for the month following a gain of more than 10% is just 1.44% or a fairly flat market. I’d be hard pressed to see this market actually stay flat.
Make sure to check out our interactive Economic Calendar and get this week’s major announcements on your calendar ahead of time. Be prepared, not surprised. Oh yeah and check out my video analysis below.
Economic Numbers In Focus
In no particular order we had a lot of news these past 2 weeks as it relates to the economy. GDP expanded last quarter at one of the fastest rates in a year. When you dig down into the numbers the gains were in consumer spending and business investment (clearly positive for our consumer driven economy) but a big red flat was the declining income and savings rate.
The FED and Jobs
To add to the slew of earnings and important announcements this week, the Fed is highly expected to announce another round of QE3 (when will it ever end Ben!). Of course this is good and bad right? If no QE program is announced it’s because they believe in a slow but still positive growth rate for the US. On the other hand, another QE program really highlights the fact that they are worried about another recession.
Plus, this Friday the highly anticipated jobs report is due. Most of the analysts on the street expect unemployment to hold steady at 9.1% in October (adding 88,000 jobs). This is still well below a level that is needed to reduce the unemployment rate in the next 6 months.
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