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Bears Step Away From the Road to S&P 1700

Scott Redler
Mar 7, 2013, 11:36 AM

In the past year, I’ve fought many bears. Some of them said the European Union would break up, China would have a crash landing, and even some big-name guys said equities are dead.  I've been on CNBC numerous times talking about the "Road to S&P $1700 by 2015" and I've also talked about how to navigate the market with a plan, using a portfolio approach with position and size management in order to stay the course.

At this point, I think equities are fairly priced and should end higher this year, but entries and exits matter. The U.S economy is getting a bit better, Europe has stabilized and China has found some support.

The S&P just broke out of its decade-long slump, and we will probably see the SPX rise above $1600 this year. My "Road to S&P $1700 by 2015" could happen quicker than planned.

In my 2013 thesis, I wrote back in December that I liked Bank of America (NYSE:BAC), Facebook (NASDAQ:FB), Yahoo! (NASDAQ:YHOO), Boeing (NYSE:BA), Mosaic (NYSE:MOS), Toyota Motor (NYSE:TM), Google (NASDAQ:GOOG), LinkedIn (NYSE:LNKD), and Facebook (NASDAQ:FB).

Lots of my picks have had major moves and I do think they can go higher.

I also stated Apple (NASDAQ:AAPL) could see $420 and now it has sunk to that level. It's still a weak stock that's hard to trust.

The beauty of this rally is that there is lots of participation across sectors. You can pick positions that you like and the important thing is to trade around them.  Use a tier system and also have hedges on when the time is right.

Unfortunately, I think this economy is the new normal. The market will probably never fully get away from the Fed's accommodation and the jobs market may never feel strong.

Companies are increasing dividends and buybacks in order to increase shareholder equity.  At some point, if Washington stops being dysfunctional, federal lawmakers will increase capital expenditures (CapEx), or assets acquisition, which I think would be better for hiring and Main Street.

My positions change every few weeks, based on which direction the market takes.  My focus is the intermediate trend and where there is relative strength.

Metals have been weak and out of play.  Gold broke its intermediate trend last month and now it is hovering on macro support, so it is key to see which way this might go.

As for the S&P's short-term technicals, $1530 is the support level and the big resistance area is $1550-$1576.  The S&P is inching up this morning, alongside the Dow Jones Industrial Average and Nasdaq, the weekly jobless claims numbers were lower than expected, and the bears are taking a beating.

 

One of today’s notable movers, Boeing (NYSE:BA) saw another nice breakout as the stock is up 3.3% to $81.67.

 

Recently, there were some headlines about the company’s potential cash drag in 2013 relating to its 787 battery issues. But the stock took all this negativity in stride.  It held the important 200-day moving average in late January and made a methodical move back to the upside after that.

 

After inching higher into the intermediate resistance at the top end of its macro wedge pattern, the stock saw its first breakout move at $77.80  on Tuesday when it broke above this downward trend line. On the same day, the stock reclaimed all key moving averages which added some power to its rally. After that BA saw some nice follow-through on Wednesday showing commitment at higher levels which lead to today’s explosive move.

 

BA was mentioned in my 2013 predictions as it was breaking out of a multi-year mid-level base and looked poised for a move higher. My first target was $80 which was achieved after its recent 3-day move. For macro investors, the stock has room to the next real resistance level of $85 in the upside.

 


*Disclosures: Scott Redler is Long: MS, MSFT, FB, MGM, CIT, NKE, BAC, F, BA, BAC. Short SPY.

Last Updated ( Wednesday, 13 March 2013 13:44 )
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