In this week's interview, we ask Toni Turner of TrendStar Trading Group for her thoughts on how the market has started the year, and if it can continue its current trend.
EQ: Thus far, 2013 has been pretty good for investors as the market has slowly inched upward in a relatively calm manner. Are you surprised by this given the drama investors endured at the close of 2012?
Turner: Yes, I’m somewhat surprised. After the November election, though, the market has been trending higher except for the last week of December. As we’ve mentioned before, November, December and January are usually the most positive months of the year. So it was gratifying that the market could right itself after the downturn at the end of December and start trending higher again. We also had a rash of good economic reports and a minimum amount of negative global news. It’s been a great study of the fact that when left to its own devices, the market does have an upside bias.
EQ: You’ve been watching the Chicago Board Options Exchange Market Volatility Index pretty closely. What is the fear indicator telling you?
Turner: The VIX is back to the August 2012 lows. In fact, on Thursday, it fell to an intraday low of 13.13. When we ask how low it can go, we need to remember that in December 2006 the VIX fell to a low of 8.60. Interestingly enough, the S&P 500 was trading at about 1430 at the time. Right now, we’re trading higher than that and the VIX is not down to that point yet, but we have to remember while it is at extremes, it does have the possibility of going lower if we just don’t have anything happen in the market that can cause it to move. Now, if Washington stays quiet for another week or two, we may see the fear indicator fall below 13. Of course, “may” is the operative word.
The indicator is definitely in extreme lows here relative to recent history. At this point, so many stocks are so overbought and I think the market will use any excuse to take profits. In which case, uptick of the VIX probably will warn us ahead of time, of an impending pullback. So this may be the calm before the storm, so to speak.
EQ: Fourth quarter earnings season kicked off last week. What are your thoughts so far and are there any names that you think are worth keeping an eye on?
Turner: I’m watching Microsoft Corp. (MSFT) here, which reports earnings on January 24 after the market close. Microsoft had a good winter last year, but since then it has given back most of its gains. Right now, it’s sitting on very strong support if it can stay above $26. After earnings come out, this entry gives a dividend of 3.40 percent annually. That’s a very nice dividend, and certainly better than the 10-year bond. So Microsoft is a candidate for me right now.
In Toni’s Market Club, we like to look at stocks that are out of the spotlight because we find that sometimes their moves are much more orderly. In addition to Microsoft, we’re looking at Sonoco Products Co. (SON). It’s a paper company focused in containers and packaging. Their earnings come out February 13 before the market open. Sonoco is similar in price move to Microsoft in that it rose nicely last year into the mid-year, but then gave back gains and returned moved back to where it started. However, this little company has regained its footing and it looks like it may rise into its earnings report here. It also pays a 3.9-percent dividend annually, which is certainly acceptable. . So if it stays above $29, we will be happy.
EQ: Which stock sectors or industry groups that you’re paying attention to right now?
Turner: Most groups right now are very overbought. One group that is not, mainly because of AT&T, Inc.’s (T) unhappy pattern is the iShares Dow Jones US Telecom (IYZ). I suspect that after we get through a few more earnings, we can catch a potential updraft here in the Telecom ETF. Also, if global economies continue to expand then I’m watching to add or enter more on pullbacks of the iShares Dow Jones US Oil Equipment Index (IEZ) and the Energy Select Sector SPDR (XLE).
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