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Will Wall Street Ever Tire of Stimulus?

The Fourth of July may be over, but the celebration is still going on for the stock market. Traders and investors were greeted with the Federal Reserve's renewed dovish stance on the eventual

The Fourth of July may be over, but the celebration is still going on for the stock market. Traders and investors were greeted with the Federal Reserve’s renewed dovish stance on the eventual tapering of its bond-buying program, relieving a lot of the market’s concerns built up over the past few months. In this week’s interview with Toni Turner of TrendStar Trading Group, we got her thoughts as well as a few potential opportunities in the market right now.

EQ: Fed watchers seemed to get a nice change of pace Wednesday as stocks seemed to hold steady after the latest FOMC minutes were released. Also, Chairman Bernanke’s comments may put some of the taper talk at ease for now. What were your thoughts here?

Turner: As it turned out today, with the indexes shooting to new highs, we can see that Chairman Bernanke’s comments indeed infused the markets with a big shot of energy. As a reality check, we need to remember that many traders were short going into his comments on Wednesday, and we saw non-stop short covering all day Thursday. Of course the market was also breathing a sigh of relief, as it assumes the central bank will “push back” the reduction of bond buying.

Good earnings, especially from JP Morgan Chase (JPM) and Wells Fargo (WFC) on Friday before the bell many help the market continue the run-up. My question is, when will the market consider that the continuation of bond buying is not a positive message?

EQ: Oil pushed through the $100-threshold recently. Do you like the prospects for this going higher?

Turner: I really do. If traders and investors look at the United States Oil (USO), they’ll see an inverse head-and-shoulders pattern that has formed there, which represents a bottom reversal pattern. The USO tracks the price of WTI crude oil, and it may be easier to see the pattern there. I first noticed it forming around the end of May, and then I watched it continue to form. At the time, I thought that if the pattern played out, , the measured move could take the USO up to $39 and oil up to $108, because an inverse head-and-shoulder can be a very powerful reversal pattern.

At the time, I wondered what in the world could possibly cause such a big move. I didn’t see anything on the horizon when I first recognized that pattern, but a few days later, the turmoil in Egypt started. That started running up the price of oil, as did reports of higher usage.

The USO dipped on Thursday, falling to close at 37.01. In Toni’s Market Club, we are waiting for the pullback to form, ideally falling to between $35 and $36. When, or if, it bounces, we will consider re-entering.

EQ: We kicked off earnings on Monday with Alcoa reporting. Are there any names that you’re looking forward to in the next few days?

Turner: Early next week, we have Citigroup (C) before the open on Monday. That will be another indication of the health of the Financials sector, along with JPMorgan and Wells Fargo. On Wednesday after the close, Intel (INTC) is going to report. I’m always interested in seeing Intel’s earnings results, especially with the PC market currently under fire, but I’m also interested in seeing what their guidance will be for the remainder of the year.

EQ: Any sectors or industry groups that you’re watching right now?

Turner: I’m back to watching my summer habit of watching the water industry group, and the PowerShares Water Resources (PHO). That has bounced nicely off its rising 200-day moving average. It’s actually moved up in fairly parabolic manner. If it can pull back to $22.25 or $22.50, I might be interested in entering.

I’m also watching an ETF no one ever talks about, and for good reason because it has low volume. I’m watching the Global X Fertilizers/Potash ETF (SOIL), though I’m not entering here. I want to see over the next few weeks what SOIL will do. It had amazing volume on Wednesday as compared to its recent volume, so I’m wondering what’s going on there. Again, I haven’t entered a position but I just want to see if it has started a bottom here.

Copper, base metals, and industrial commodities face bearish technical trends, but the fundamentals remain bullish.