With the presidential election coming to a close, investors are hoping that the results will help to alleviate some of the uncertainty that has plagued the market in recent months. In addition to knowing what the next administration will look like, many are expecting those in the White House and on Capitol Hill will finally be able to move forward to address the impending fiscal cliff.
In this week’s interview with Toni Turner of TrendStar Trading Group, we discuss what may finally happen if and when the market decides to break out of its holding pattern, and what areas could potentially benefit.
EQ: Election day is finally here. Have investors been holding their breath for this moment? What do you think could happen when they finally exhale?
Turner: After the election, no doubt, the market is going to look forward to the fiscal cliff. We need to see signals from Congress that they actually plan to compromise; otherwise we’re going to see the mandated spending reductions and expiring tax cuts loom large on the horizon. Somehow, they will have to create programs that will instill confidence for business. If that doesn’t happen, then the market will be very unhappy, and that indecision can put the kibosh on any upcoming rally.
EQ: It’s been a week since Hurricane Sandy shut down Wall Street for two days. How has the market responded since re-opening last Wednesday? Have you noticed any impact from the storm on the market?
Turner: What I noticed was that by the close of last week, we really ended up flat on all three major indices. Some stocks certainly did well–like the remodeling, self storage, waste removal stocks. Toni’s Market’s Club members were in Clean Harbors, Inc. (CLH) and it gapped up, and at the highs we had a 12-point profit. Of course, that was the right thing that happened for the wrong reason. But that’s an example of stocks like that popping up very quickly in certain industry groups. I have also noticed that a lot of stocks have back-to-back action, meaning up high one day, then erasing it all the next. So we’re kind of back to where we started. Of course, many utilities stocks like Consolidated Edison Inc. (ED) have been slammed.
EQ: You mentioned recently that when stocks are flat for too long, they tend to get heavier. Can you elaborate on that? Is that what’s happening now in the market?
Turner: Maybe not yet, but we’re getting close to it. When a stock—and occasionally even a market—trades sideways for too long, we say it gets heavy. Simply put, it means traders and investors get bored so they take their money and go somewhere else. I think we definitely could go either way here. One worry I have, and I haven’t heard anyone talking about it too much yet, is that the euro is breaking down here. The euro has been trading sideways since around September, and it’s been trading down and has not been able to make a higher high. Plus Germany came out with negative numbers, today. The euro is definitely losing steam here, and that could potentially end up pressuring our market.
EQ: The trend of investors pulling money out of the market has been one you’ve been noticing for a while. Do you think this will continue after the election?
Turner: I want to be positive here, because November, December and January are typically the best months of the year. It’s a seasonal effect. I know hope is not a plan, and I don’t use it as one, but I would certainly like to be optimistic looking forward. We should be getting that seasonal effect, especially if we can get resolution from the election, and hopefully resolution from the fiscal cliff. Also, if consumers stay strong and retail numbers do well, logically, that would take us into a very nice fourth quarter. However, if the euro continues to fall and the US dollar continues to strengthen, then we could see the market head south.
EQ: Any particular stock sectors or ETFs that you’re watching for this week?
Turner: I’m watching the Market Vectors Agribusiness ETF (MOO), which is a global ETF that has agricultural equities in it like the big Monsantos (MON) and Deeres (DE). It is trading above its 50 and 200-day moving averages. I’m will keep an eye on it after the election to see if it can break above 52.
I’m also once again watching the PowerShares Water Resources (PHO). That sprung higher after Hurricane/Super Storm Sandy, and my guess is it needs to pull back here. If it does, then I want to see if it can break above $20. If so, then I’d be interested in that. PHO is a very highly diversified ETF and has companies in the Technology, Utilities, and Medical industries. I think this ETF could prosper over the coming months if Utilities stocks can reverse and trend higher, again.