While the holiday season is in full swing, traders and investors typically look to the last week of the year for a Christmas bonus of sorts. With no real near-term headwinds on the radar, bulls have some running room for another Santa Claus rally. In our latest interview with Toni Turner of TrendStar Trading Group, we discuss a few of her favorite plays of the past year, and a few areas of the market she'll be watching closely to start 2014.
EQ: We've had a bit of an up-and-down market for most of December, but from here on out, do you see the Santa Claus rally carrying the market through to close out the year?
Turner: As you know, the Santa Claus rally takes place on the last five trading days of the year and the first two trading days of the coming year. The theory goes, if you buy stocks, or the market–perhaps via the S&P 500 SPDR ($SPY) on the first day of the rally period, which would be a day or two before Christmas day, and held your positions through the second day or third day of the New Year, you would make a profit. This strategy worked last year—although it would have been an anxious trip for the first five days—as the market fell during that time. It gapped higher on Jan. 2 and 3, however, and Santa brought traders expected gains.
I wouldn’t be surprised if the market made a similar pattern this year–retracing some of the gains just registered in recent days, and then springing into the first of January. Still I would only make this play with “no kidding around” protective stops in place, and with small share size. We’ve run up dramatically recently, and the chances of profit-taking remain high.
EQ: The Fed's decision to begin tapering in January 2014 was greeted fairly well by the market. Why do you think traders and investors responded so positively to the news?
Turner: I believe we experienced a “relief rally” on the Fed’s news. And by relief rally, it appeared as though traders and investors were extremely relieved to finally receive a road map for stimulus reduction, even though it was a vaguely-drawn one. Most of us can handle market gyrations if we know, at least to a degree, what the Fed is thinking. It’s uncertainty that drive markets into volatility. Of course, I remain bullish, but cautious at present. The market is priced to perfection, and any disruption could cause happy investors to take some gains off the table.
EQ: What were some of your favorite sector or industry plays from 2013?
Turner: We enjoyed the Aerospace and Defense plays–iShares U.S. Aerospace & Defense ETF ($ITA)–and we played Rockwell Collins Inc. ($COL) along the way. It was especially gratifying, as we were hesitant early in the year due to the “sequester,” which would have had a negative impact on the stocks in this group—but didn’t. As you can see by the ITA, this group moved in a near-perfect uptrend, right into the present time.
As well, the industrials as a whole—aerospace and defense are an industry group in the industrial sector—also moved in a dandy uptrend, and we played a lot of stocks in this sector, including Crane Co. ($CR), and the AptarGroup, Inc. ($ATR).
EQ: What are some of the biggest developments or storylines that you're excited about heading into 2014?
Turner: With the economy taking baby steps toward recovery, we should see earnings strengthen, and with that, more capital spending, business investment, and hiring.
In Toni’s Market Club, and in other venues to which I contribute, we will look at energy stocks. Right now I like the iShares U.S Oil Equipment and Services ETF ($IEZ). Wind energy is also getting some play here, and you can track that with the First Trust Global Wind Energy ETF ($FAN). Oil prices tend to rise into the first of the year, and if that takes place, there are many opportunities in this space.
We’ll also look at the Claymore Shipping ETF ($SEA) for shipping stocks, which have been beaten down most of the year .
Of course, if the yield curve continues to rise, we will also be keeping an eye on the SPDR Regional Banks ($KRE), which will benefit from that event, as well as the boom in the housing industry.
All in all, I believe we have an exciting and positive year ahead.
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