The erratic behavior of the markets in recent weeks has added to the growing uncertainty for traders and investors. Have stocks bottomed from the correction or will there be another leg lower as the Federal Reserve is expected to make its latest announcement? In our latest interview with Toni Turner of TrendStar Trading Group, we discuss how traders may want to approach the market over the next week.
EQ: Since bouncing off the lows of the recent correction, the S&P 500 has managed to stay above the 1900 level on a closing basis. What areas of support and resistance are you watching?
Turner: For resistance, I’m watching 1990 and for support I’m watching 1867 on the S&P 500. This isn’t my favorite price pattern and it currently doesn’t make me bullish. I’m waiting for it to prove itself. If it wants to stay to in the bull market that it has enjoyed, we need to see it rise above 1990, or to be safe, close above 2000 and stay there. Right now I’m watchful and very cautious.
EQ: Next week is a big week for the Fed and its rate hike timeline. Does this have any influence on how you're approaching the market the next several days?
Turner: Yes, it does. I’m staying very conservative. I am executing some short-term trades but I intend to have a good portion of cash raised by the end of this week or the start of next week—and I’m well on my way to that already. I may lose some opportunity, but as I’ve said before, I’ve found that missed opportunity is much easier to make up than lost money. I don’t think anyone knows what the Fed is going to do. They themselves may not even know at this moment in time. As you know, the market really dislikes uncertainty, and right now, the chart of the S&P 500 as well as many other indices are broadcasting uncertainty. So for me and my students, it’s a good time to be conservative and, as they say, keep our powder dry for when the opportunities are better.
EQ: Oil prices are still way off on the year but it does seem like it has stabilized since late August. Can it hold this level?
Turner: I would like for it to hold this level, but I’m not sure that it’s going to do so. Oil prices typically spike in August, but my concern is that, seasonally speaking, oil prices usually soften in the fourth quarter and then start rising again in January. Of course, we’ve had this selloff in oil over the last year, and now with the Iran nuclear deal finding support, we know that Iran’s oil will be coming back on the market shortly. With that, combined with seasonality and the global slowdown evidently happening, I suspect that oil could retrace here at least one more time before it finds its actual bottom.
EQ: What sector or industry group are you watching now?
Turner: I’m not necessarily buying anything, but I’ve been watching the iShares U.S. Home Construction ETF (ITB). If it I have admired how it’s managed to hold up through the volatility that we’ve experienced in the last three weeks and may be interested in it if it can hold above $27. I am also keeping an eye on the iShares U.S. Aerospace & Defense ETF (ITA), more specifically, I’m watching Rockwell Collins (COL) and looking for a pullback in Raytheon (RTN). . Again, do not plan to acquire new long positions until after the Fed’s decision.
Also, the iShares U.S. Real Estate ETF (IYR) and the Utilities Select Sector SPDR Fund (XLU) have both sold off dramatically this year and in particularly in the last three weeks. So if we do not get a rate hike, I will be all over these two after the Fed announcement like white on rice!
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