The future outlook of the Stock Market (SPY), is becoming more and more confusing...not clearer. Why? What does this mean for stocks over the next few weeks? What is the best way to trade in order to stay ahead? Steve Reitmeister, a 40-year investment veteran, shares his thoughts in the following commentary. He also lists his top seven stocks for today's stock market. Continue reading below to learn more.
In the last six months, the stock market reached a new low of 3,491. Since then, the stock market has seen a massive bounce. We are now at 4,137.
Are we still in the bear market...or is a new bull on the horizon?
Today's commentary will focus on this vital topic, as well as our trading plan and top picks.
Technically, we're still in a down market. This is because a new bull-market is defined as the S&P 500's (SPY) 20% rise from its lows. This is the math:
3.491 October lows x 20% = 4.189
Some will argue that it was an intraday low, and that it is more accurate to use the October 12 closing low of 3,577 as a basis for measurement. This would mean that stocks would have to rise above 4,292 in order to be considered bullish.
We are moving closer to a breakout bullish. We are in a state of limbo at the moment, which creates a trading band.
You could say that it is as wide as recent lows between 3,855 and 4,200. I believe that the majority of my time in the near future is going to be spent within a narrower range between 4,000 and 4,200.
Why Are We in Limbo?
The threat of a recession is still very real. The FOMC minutes on Wednesday discussed the fear of a recession in 2023 due to residual damage caused by banking issues.
We have been hearing about the recession threat since early 2022...and yet it has not happened.
Many traders have learned to be cautious when hearing a whisper of recession. In the past, they have been cheated too many times by the markets.
The market has been trending upwards over the past six months. It will be difficult to see much more upside before the bears have a firm conviction that no recession is imminent.
The new bull market will not begin until the forecast improves and more bears become convinced. The new bull market will start when more bears turn tail and begin buying seriously.
In fact, the storm clouds of recession still hang over us. This is especially true since the Fed's main goal is to stop inflation by "lowering demand". Lowering demand can be a way to say they want the economy to slow down.
In an ideal world, this would be a soft land near 0% GDP prior to the economic growth engines resuming. In this scenario, we've already seen the stock markets lows. The next bull market will emerge.
It is also possible that the "lowering of demand" will actually lead to a recession, with negative growth and job losses, as well as a much lower stock price (below October's lows).
The recent shocking drops in ISM Manufacturing, Service, and Friday's Retail Sales Report paint a picture of a potential economy tipping into negative territory. Remember that FOMC minutes indicated that they were more concerned that recent banking problems would be detrimental to the economy, likely leading to a possible recession by the end of the year.
If these threats continue, there will be enough bears to stop the market from going much higher.
This standoff between bulls vs bears is likely to result in a trading range with significant resistance at 4,200, as found in February. I don't believe that the Fed announcement on May 3rd will have the power to change this outcome.
This trading range scenario could last for the rest of the summer, until investors are able to better assess the likelihood of a recession.
Range Bound Trading Plan and New Pick on Monday
Investors often say that there is no stock market, but rather a market for stocks. Each stock can rise regardless of the market conditions.
This saying is easier to understand when you realize that in 2022, over 2,000 stocks were still in positive territory while the bear market ravaged the majority of other stocks. Over 1,000 of these stocks rose by 50% or more.
It is important to be aware of the best funds and stocks to invest in to achieve the highest returns. In my 43 years as an investor, nothing has done a better job than the POWR ratings scan. It looks at 118 factors to determine a stock's future success.
Even though I am fully aware of the possibility for a recession and a deeper bear market I want to identify the best stocks and funds that we should hold in our investment portfolio.
Discover my balanced approach to portfolios for uncertain times. This is the same approach which has helped you to rise above your peers in April.
This strategy was developed based on over 40 years' experience in investing to understand the uniqueness of the current market.
It is neither bullish nor bearish at the moment. Rather it is confused...volatile...uncertain.
Even in this less than attractive environment, we can still chart the course for success. Click the link below and get on the right side.
Reitmeister Total return Editor and CEO of StockNews.com
SPY shares increased $0.69 (+0.17%), in Friday's after-hours trade. SPY shares have gained 8.26% year-to-date compared to a % increase in the benchmark S&P 500 Index during the same time period.
Steve is known as "Reity" to StockNews' audience. He is not only the CEO, but also shares 40 years of experience with the Reitmeister Portfolio. Reity's biography is available, as are links to some of his recent articles and stock selections.