econintersect.com
       
  

FREE NEWSLETTER: Econintersect sends a nightly newsletter highlighting news events of the day, and providing a summary of new articles posted on the website. Econintersect will not sell or pass your email address to others per our privacy policy. You can cancel this subscription at any time by selecting the unsubscribing link in the footer of each email.



posted on 10 June 2016

How To Profit In This "Boxed-In" Market

by Staff Reports Money Morning, Money Morning

-- this post authored by D. R. Barton, Jr.

The market is sending us decidedly mixed signals right now. We've had some welcome upward moves lately, notwithstanding a little halfhearted profit-taking yesterday.

Analysts all have different explanations for the buoyant markets - oil prices, the strong dollar, an uptick in dealmaking, and now even surging new home sales. Those are all to the good, but I think they're overestimating the importance of those factors.

Don't get me wrong - it's OK to get excited about the rally, because there are some constructive technical reasons to like it. Critically, lots of stocks in most sectors have come along for the ride.

But here's where those mixed signals I was talking about come in. The welcome upward moves just haven't been able to get the markets out of the "box" they've been stuck in for the past eight weeks or so. And, as you'll see, there's still a great deal of uncertainty about one sector in particular.

So I'm going to show you what my technical analysis reveals about how we can get "out" of the box, and where we'll likely land when we get there.

And then I'll recommend some profit plays to make right now...

The Box Isn't Budging

As I said, there have been some positive market developments in the past week, but the horizon isn't completely clear right now.

Have a look at this chart, which shows perfectly that "box" I spoke about.

stocks to buy this week

Early this past week we held the important support zone of 2,040 in the S&P 500.

Now, as we test the upper edge of our box, it will be important to see how the market reacts at the equally important 2,105 to 2,110 resistance area.

I'll be watching to see if the market can maintain any upward momentum and challenge this area or if it will have its next pullback falling short of challenging the recent swing highs.

The markets are telegraphing that an assuredly imminent U.S. Federal Reserve interest rate hike has yet to be priced in. Not for nothing is the total number of investors "in cash" close to a 15-year high. That money is out there on the sidelines because of uncertainty, mostly over the rate hike, but for other reasons you'll see in a moment.

I tend to think that the central bank won't let markets tumble far after any hike, and there are signs that line of thinking may be catching on out there, but the market is far from convinced.

But there's another big question mark on the market's mind.

The Rally Is Good, but Oil Uncertainty Still Reigns

You can't overstate the importance of oil as a barometer of the global economy, and despite some mixed-to-positive data in the United States, the rest of the world simply isn't faring as well, and that's helping keep traders on their toes - and downward pressure on oil.

The black stuff is still in an impressive climb, with fresh momentum coming from global geopolitical inputs. Production in the United States has fallen somewhat, but across the ocean, the so-called "Niger Delta Avengers" attacked a Nigerian oil pipeline last week in the country's restive Delta region, disrupting supplies. We're also seeing Venezuela teeter on the verge of total collapse right now. Both of these countries have some impact on global oil supply, but this is mostly psychological.

Closer to home and much more important to the United States, the mammoth Fort McMurray, Alberta, wildfire - which saw virtually the entire 88,000-plus population of Canada's most important oil hub evacuated last month - is now under control. Residents are returning to the area, but it will be some time before oil production in the province is what it once was.

Nevertheless, $50 oil "is a psychological milestone," Michael Wittner, the head of oil market research at Société Générale SA, said:

Still, "some Nigerian oil will be back and all Canadian, and the big question is whether it will matter. The market might not care."

All of this is helping oil to flirt with the $50 mark, but until oil can stay above $50, it won't be "out of the woods" yet. Remember, the world's 50 biggest publicly traded oil companies need an average price of $53 a barrel to stanch their collective cash bleed, according to a report by Wood Mackenzie Ltd.

So oil and energy companies aren't necessarily a resounding "Buy" this week, but I do see a few stocks out there that look tempting right now.

What to Buy Now

In an uncertain market, where volatility is always waiting in the wings, uncorrelated or low-correlation stocks are your friend.

Last week, just before the long weekend, my Stealth Profits Trader readers cleaned up with a triple-digit win on Biogen Inc. (Nasdaq: BIIB) nine days after entering the trade on a stock that traditionally has a very low correlation to the broader markets. A strong Hooke pattern was the signal to move, but this stock remains a good buy right now.

I have been and continue to be very impressed with Lockheed Martin Corp. (NYSE: LMT). Another week, another multimillion-dollar contract seems to be the company's MO right now. It built on an unbroken winning streak last week after announcing it had been awarded a $424.7 million contract with the U.S. Navy. As part of the deal, Lockheed will supply MK 48 common broadband advanced sonar system upgrade kits as well as MK 48 heavyweight torpedo controls to the Navy. The latest contract is part of a five-year initiative to grow the inventory of the MK 48 Mod 7 torpedoes for the submarine fleets of the U.S., Royal Australian Navy, and several other Commonwealth and South American navies. Peace could break out all over, and I'd still like Lockheed's prospects.

Another old favorite of mine that continues to impress is classic utility PG&E Corp. (NYSE: PCG). I recommended the San Francisco, Calif., electric company last month and it's up a tidy 3.3%. In fact, the shares hit all-time highs on Tuesday, and I think there's still more room to run. The firm announced that it will be increasing its quarterly dividend rate by $0.035, which brings the annualized payout to to $1.96 per share. This is the first annual dividend hike by PG&E in six years, but there are even better days ahead. My Stealth Profits Trader readers are closing in on triple-digit profits with a trade on these shares, too.

And speaking of Stealth Profits Trader, my conference call last week was a big success. I recommended some specific trades to make that will give readers the chance to profit on two of the biggest long-term trends I've identified coming into the bottom half of the year. If you missed it, click here to access a recording.

I'll be back with a look at what to do when the markets get closer to those critical support and resistance levels I mentioned.

>>>>> Scroll down to view and make comments <<<<<<

Click here for Historical Investing Post Listing










Make a Comment

Econintersect wants your comments, data and opinion on the articles posted.  As the internet is a "war zone" of trolls, hackers and spammers - Econintersect must balance its defences against ease of commenting.  We have joined with Livefyre to manage our comment streams.

To comment, using Livefyre just click the "Sign In" button at the top-left corner of the comment box below. You can create a commenting account using your favorite social network such as Twitter, Facebook, Google+, LinkedIn or Open ID - or open a Livefyre account using your email address.



You can also comment using Facebook directly using he comment block below.





Econintersect Investing


search_box

Print this page or create a PDF file of this page
Print Friendly and PDF


The growing use of ad blocking software is creating a shortfall in covering our fixed expenses. Please consider a donation to Econintersect to allow continuing output of quality and balanced financial and economic news and analysis.


Take a look at what is going on inside of Econintersect.com
Main Home
Analysis Blog
Energy and Falling Productivity
Reinhard Selten: Pioneering Analyst of Rationality and Human Behaviour
News Blog
Americans Wary Of Drone Delivery
Britain's Wealthiest Households
What Next In The South China Sea
The Dollar - Gold Relationship
Almost Half Of Rape Cases End Without A Conviction
People With 'Obesity Gene' Can Still Lose Weight
The World's Most Generous Countries In 2016
What We Read Today 24 September 2016
Is The Butterfly Effect Real
August 2016 Philly Fed Coincident Index Shows Continuing Slowing Of Economic Rate of Growth
Global Bonds: Why Our Analyst Says Things Just Got "Monumental"
Trends In Expenditures By US Colleges And Universities, 1987-2013
Why Firms In Developing Nations Don't Grow As Fast
Investing Blog
The Week Ahead: How Will Election News Impact The Market?
How To Protect Your Money Against Negative Interest Rates
Opinion Blog
There's No Wall Between The Fed And Banco De Mexico
The Setting Sun: Japan Faces Monetary Exhaustion
Precious Metals Blog
War On Cash Turns To $20, $50, And $100 Bills
Live Markets
23Sep2016 Market Close: US Indexes Close Lower As Crude Prices Slip, Fed Lowers Economic Growth Prospects, Indicators Melting Into Bearish Territory
Amazon Books & More






.... and keep up with economic news using our dynamic economic newspapers with the largest international coverage on the internet
Asia / Pacific
Europe
Middle East / Africa
Americas
USA Government



Crowdfunding ....






























 navigate econintersect.com

Blogs

Analysis Blog
News Blog
Investing Blog
Opinion Blog
Precious Metals Blog
Markets Blog
Video of the Day
Weather

Newspapers

Asia / Pacific
Europe
Middle East / Africa
Americas
USA Government
     

RSS Feeds / Social Media

Combined Econintersect Feed
Google+
Facebook
Twitter
Digg

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution

Contact

About

  Top Economics Site

Investing.com Contributor TalkMarkets Contributor Finance Blogs Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2016 Econintersect LLC - all rights reserved