While stocks closed out 2013 at all-time highs, the early goings of the New Year have seen some choppy waters for traders and investors. Is this an indication that stocks may be finally preparing for the long-awaited pullback? That may not necessarily be the case, but in this week's interview with Toni Turner of TrendStar Trading Group, she emphasizes that caution should still be the predominant mood when operating in the market.
EQ: January is shaping up to be an interesting month for the market. We’re experiencing some choppy trading in the early going. What are your thoughts so far of the market’s behavior?
Turner: Goldman Sachs’ call on Monday saying that valuations are becoming frothy sent the market lower. The down move was countered by good earnings from Wells Fargo ($WFC) and what I call “the law of strong uptrends” when the “buy the dips” kicked in. So the market popped back up.
This week, though, a dynamic has taken place that I haven’t seen take place in a long time: A great majority of my short positions have met and exceeded their profit targets.
In fact, last week and this week my short positions are playing out very well for the first time in a long time. So while that may not be a big enough sample size to hang a decision on, for me, it is something that is worth noting.
The RSI on the S&P 500 is in a downtrend, and while the S&P 500 is basically consolidating here and back toward its high, I think caution is still the best operating theme right now.
EQ: There seems to be some legitimate concerns coming from the retail space that Q4 may have been weaker than people expected. Are you noticing similar sentiments for stocks in that space?
Turner: Yes, many retailers are in trouble. The SPDR S&P Retail ETF ($XRT), which we’ve spoken about before, is now down 6 percent off of its November highs.
Best Buy ($BBY) and Bed Bath Beyond ($BBBY), two big winners in 2013,have experienced big losses. Of course, we’re used to looking at J.C. Penney ($JCP) and Sears ($SHLD) and their misery. Then there are the suffering teen retailers like Abercrombie & Fitch ($ANF) and American Eagle Outfitters ($AEO), and now we’re looking at cosmetic companies starting to take hits. Elizabeth Arden ($RDEN) came out with disappointing earnings, and Ulta ($ULTA) is headed south.
This whole retail industry group is being re-defined right now and I think many retailers, especially the weak ones, are going to take a hit until our jobs numbers improve in the U.S.
EQ: You’ve said before that the retail space serves as sort of an indicator for the consumer. Does this raise broader concerns about the economy being maybe weaker than we had thought heading into 2014?
Turner: It definitely does for me, especially when you pair up the really ugly monthly jobs numbers that came out in December. Everyone tried to put a Band-Aid on, calling it weather and so forth, but the people actually leaving the workforce are now starting to reflect in the numbers in the retail space. And its not pretty. .
EQ: Are there any other earnings plays that you’re looking at for the coming week?
Turner: Yes, we know that the market is closed on Monday. On Tuesday, I’m looking at regional banks. I want to see if the housing industry is going to continuing bolstering these names. I’m looking at Southwest Bancorp ($OKSB) on Tuesday, Regions Financial ($RF), and Synovus Financial Corp. ($SNV). I’m also watching Rockwell Collins ($COL) on Tuesday. I It’s one of my core positions and it’s done very well.
Plus, I want to see how IBM ($IBM) plays out for the big traditional tech stocks.
On Wednesday, I’ going to monitor Jacobs Engineering Group ($JEC) for global infrastructure plays. On Thursday, I’m looking at JB Hunt Transportation Services ($JBHT), as we trade that in Toni’s Market Club.. Also on Thursday, McDonald’s ($MCD) reports, which should be interesting, especially to see what their net profit margins will look like.
EQ: What sectors or industry groups do you have your eyes on right now?
Turner: We’re looking at the medical REITs. REITs, as a whole,have taken a big hit in the last half of 2013 on the back of rising interest rates. Now, they are starting to show signs of life. We’re looking at BioMed Realty Trust ($BMR), Ventas ($VTR), and HCP ($HCP). Despite the hit, Ventas earnings per share grew 30 percent in 2013. So I think some of these medical REITs y could be bargains.