A "Gradual" Move Off All-Time Highs

A "Gradual" Move Off All-Time Highs

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Big political news dropped this morning when the Mueller investigation indicted President Trump’s former campaign chairman Paul Manafort. But the market didn’t really care too much about that. The indictment was not a surprise and doesn’t seem to have a direct connection to the President. But the market DID care about reports that the House is discussing a gradual phasing-in of corporate tax cuts. Needless to say, the market isn’t crazy about that idea.

Therefore, the major indices took a step back from their record-setting paces today. The Dow was off by 0.36% to 23,348.7, while the S&P declined 0.32% to 2572.8. The NASDAQ soared by more than 2% on Friday and only gave 0.03% back to finish at 6699. Looking forward, this will be another busy week of earnings. 

Counterstrike had been waiting for a pullback to make some moves…and here it is. Jeremy added two companies on Monday that were recently taken lower by high-frequency traders after solid quarterly reports. The editor plans to ride them higher from here. Technology Innovators added its 15th name (putting the portfolio halfway toward its ideal goal of 30 positions), while the Black Box Trader swapped out four. Read about these moves and more in the highlights section below: 

Today’s Portfolio Highlights:

Counterstrike: The market finally pulled back enough for Jeremy to feel comfortable buying new positions. He added two names on Monday: Dynamic Materials (BOOM) and Callaway Golf Company (ELY). BOOM operates technical product and process businesses in the energy, industrial and infrastructure markets. High-frequency traders took the knees out of this company’s price surge following a 120% earnings surprise. Jeremy swooped in with a 10% allocation in BOOM and plans to be part of a larger breakout to come. 

You already know what ELY does. But what you may not know is that this company just reported a great third-quarter performance, including better-than-expected earnings and revenue results AND a raised guidance. Yet the stock quickly slipped back to pre-earnings levels after briefly hitting all-time highs. Yep, the HFTs were playing their games again, and so the editor took a 14% position in ELY to ride the next swing higher. The complete commentary has more on both of these moves. 

Technology Innovators: This new portfolio is already at 15 names after Brian Bolan picked up STMicroelectronics (STM) this morning. This Zacks Rank #1 (Strong Buy) semiconductor company recently reported a beat and raise quarter. The editor thinks this name has a good chance of seeing a post earnings drift higher. Learn a lot more about this new addition in the full write-up. 

Black Box Trader: The portfolio swapped out four positions this week. The sold stocks were:

• PBF Energy (PBF, +4%)
• CNH Industrial (CNHI, +1.1%)
• Abercrombie & Fitch (ANF)
• DSW Inc. (DSW) 

The new buys that replaced these names are:

• CarMax (KMX)
• Fiat Chrysler (FCAU)
• KBR Inc. (KBR)
• Restoration Hardware (RH) 

Read the Black Box Trader’s Guide to learn more about this computer-driven service designed to take the emotion out of investing. 

Zacks Confidential: A bull market here in the U.S. could mean an even bigger bull market somewhere else in the world. This is a good time to diversify into some non-US indices…but how do you find the right country and the right investment? John Blank has a method for finding profit potential all over the globe, and today Kevin gave him the keys to Zacks Confidential to explain the process. Read his detailed article and get several recommendations by clicking: Can We Forecast Stock Returns? 

Momentum Trader:“We have been so spoiled by this market that on days like today it feels much worse than it is. The blip to the downside wasn’t caused by earnings or central banks but rather the odds of the Trump tax agenda getting passed. It’s no secret that a good chunk of this latest move to the upside has been predicated on corporate tax cuts. 

“This is a repricing of risk. Essentially money managers re-asses risks in the market and game out the odds of tax reform happening in some form. It’s not a binary proposition but rather a probability distribution. This latest round of events likely changed the skew of their distribution as well as moved the needle on the overall odds of implementation. The result is a little bit of risk-off behavior. 

“Hopefully the fallout from this latest bit of news isn’t enough to put any real strain on the stock market. This week, in addition to a plethora of earnings reports, we’ve got an announcement on the next Fed Chair coming up Thursday. Big week for markets.” — Dave Bartosiak 

Until Tomorrow, 
Jim Giaquinto

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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