With Wall Street's attention shifting back to fundamentals, the focus now turns back toward actual data such as third quarter earnings and economic data. Investors and traders also get a few headline plays as the Fed still has yet to officially begin its tapering of the stimulus program. In this week's interview with Toni Turner of TrendStar Trading Group, we discuss the current market opportunities and watch to watch for the coming week.
EQ: The S&P 500 hit a new all-time high on Thursday after the government ended the shutdown. That’s about a 5 percent surge in one week. Does it have enough momentum to keep going or do you see a cooling off period soon?
Turner: We hit another all-time high on Friday with the S&P 500 rising intraday to 1744. My next target was 1740 for the S&P 500 and we’re above that target now. As long as the Fed keeps buying bonds and pressuring interest rates lower, then the market has a good reason to move higher into the end of the year. Plus, as we’ve talked about before, November and December are typically good months for the market. Although, it does seem like we’re in atypical times as evidenced by the recent ongoings in Washington.
For the short term, my next target for the S&P 500 is 1750. However, because of the recent volatility, and much of it has been positive, I suspect we’ll see some profit-taking soon, perhaps even as soon as the coming week. Plus, the CBOE Volatility Index is trading right near the low-end of its range, and typically when it gets down to as low as it is right now—just under 13—it starts moving a little higher.
Still, that’s no cause for concern. I just think the market is getting a little weary here as we take our focus off Washington, at least temporarily, and move it into earnings season and the economic reports.
EQ: The shutdown also seems to have pushed the potential Fed tapering further down the road. Does this create opportunities in certain rate-sensitive areas that investors moved out of previously?
Turner: We’re looking at some nice opportunities here. Obviously, the interest rate-sensitive sectors include Utilities and the Utilities Select Sector SPDR ($XLU), my favorite sector at the moment, as well as the REITs and the iShares U.S. Real Estate ETF ($IYR). We can also look at homebuilders and the iShares U.S. Home Construction ETF ($ITB), and its components. There’s also Telecoms and the iShares U.S. Telecommunications ETF ($IYZ), which include AT&T, Inc. (T) and Verizon Communications Inc. (VZ) , although the IYZ, itself, looks overbought in the short-term
These are all dividend-paying value plays and as we may see a little profit-taking here as we head into the next week of earnings season, it may be wise to I check into those arenas.
EQ: Google (GOOG) reported huge earnings on Thursday. They’re up over $1,000 per share now.
Turner: It reminds me of 1999. I remember the same thing happening. Companies were up over $100 per share in a day, and those feelings are all back.
EQ: Is that good or bad?
Turner: Well, it was sure good while it lasted, but then the neighbors called the cops, metaphorically speaking. So the party was over.
EQ: Would it be wise for investors to start winding down the party before the cops come?
Turner: They should definitely raise their stops. The market is bullish right now. Who doesn’t love the iShares Russell 2000 ETF ($IWM) making new highs? The Russell 2000 can be considered a leading indicator. But I think maybe we should stop drinking champagne and perhaps switch off to sparkling water, instead.
EQ: What are some other reporting companies that you’re watching for in the coming week?
Turner: I’m watching certain companies as leaders in their space. On Monday, we’re watching Halliburton (HAL) to see what’s going to come into the oil services and equipment space. We’ll also be watching McDonald’s (MCD) to see how the global consumer is going to play out.
Tuesday, we’re watching Dupont (DD) because it’s always important to watch them to see any signs of global growth and if chemicals move higher.
On Wednesday, Delta Air Lines Inc. (DAL) is very important to see how transportation is doing. We’re also watching Lockheed Martin Corporation (LMT) for the defense and aerospace, and there’s also The Travelers Companies, Inc. (TRV) for insurance.
Caterpillar Inc. (CAT) is another important one to watch. Wall Street is expecting $1.69 versus $2.64 for the same quarter last year. We want to see if Caterpillar is going to get continued to be beaten up.
On Friday, we’re watching Simon Property Group Inc. ($SPG), which is the largest global mall REIT that I know of. That will give us a take on the global consumer as well.
EQ: Which sectors or industry groups are you looking at right now?
Turner: Most groups and sectors are up and really pushing toward their highs here. So I’m concentrating on Utilities and Telecom companies, and on REITs and homebuilders. Of course, you have to be more careful with interest rates news when dealing with the REITs and homebuilders, in particular. If the talking heads start talking about tapering for December, and they could start doing that as soon as next week, and if those rumors start making the rounds, you need to keep a close eye on REITs and homebuilders, especially, because they can get hit pretty fast.
EQ: It’s definitely a busy time right now after that slow summer.
Turner: Yes. Hopefully we all enjoyed that slow patch while we had it, because now it is quite some party.