The Coast is Clear
Sometimes I hate being so right.
I was almost alone in the desert last August, when I asserted that the dramatic sell off in share prices was nothing more than a stock market event (click here for ?The Volatility Peak is In?.
The economy was fine, there were no geopolitical events of importance, and prices would recover once sanity returned to the market in the fall.
I went through great pains to deliver you lists of shares that would lead the recovery, which have proven wildly successful (click here for ?Ten Stocks to Buy at the Bottom?.
I even used the rare opportunity of the wild summer market action to teach you how to survive and prosper during these tumultuous conditions (click here for ?How to Trade a Crash?.
Today, all of these efforts finally bore fruit.
The S&P 500 (SPY) decisively broke through the 200-day moving average to the upside. The big cap index had not enjoyed this rarified, intoxicating atmosphere since August 20.
The coast is clear.
And guess what the two leadership sectors are?
Industrials and consumer discretionaries, which I trumpeted to you on my extended research piece only yesterday (click here for ?Switching From Growth to Value?.
The big question is: ?What do we do now??
You usually don?t get a clean break of a 200-day moving average the first time around. Many believe this is a false breakout, sucking in hot money bulls just before another meltdown in November.
So we may get some choppy backing and filling right around the key 200-day number of $204.34.
This will test the faithful.
The bears will get some assistance from the Republican Party, which may attempt to shut down the government one more time by refusing to raise the debt ceiling.
Treasury Secretary Jack Lew has warned that the government could run out of money as early as November 3.
If my thesis is correct, external events such as these will just fall away like water off a duck?s back, beyond a peripatetic day or two. Use them as buying opportunities.
This breakout certainly paves the way for a run to new all time highs for the (SPY) in the $2,200-$2,300 range by March 2016, and possibly as soon as the Christmas holidays.
It?s ?RISK ON? again, baby.
