The Power of Blind Faith!
The market definitely “saved the best for last!” Friday was for sure the strongest day of the week! Beautiful numbers from Intel (INTC) sent its stock soaring over 10% on the day and sending all of the indexes to new and greater historic highs. It was the 4th straight week of gains on Wall Street. In summary for the week, each of the large indexes recorded gains of over 2%. The Dow Jones rose 2.1%, the S&P 500 jumped 2.2%, and the NASDAQ took the pot with gains of 2.3%.
The stock market could continue its record-breaking rally this coming week over the last few days of the month, the S&P 500 having already recorded month-to-date gains of 7.2%, its best monthly gains since October 2015. In the event nothing goes awry, January would represent the 10th straight month of gains for the S&P 500, the index’s longest winning streak since 1959.
The power of momentum continues to dominate the market. The only negative thing that we could say, perhaps, about the price movement is that it’s been too strong for too long – and that the clip of the movement we’re seeing in this market just can’t go the long haul. At the same time, the same could have been said a week or two weeks ago, but the market has simply repelled any naysayers, paying them no heed whatsoever.
An attempt on the part of investors to understand or justify the price movement is misguided, and will only cause too much suspicion about current movement. There are times in the market where blind faith is needed. When a herd moves in a drove, the herd mentality is the only force dictating movement. Remaining in place or trying to backtrack is a surefire recipe for disaster! There’s no choice but to move with the herd, as much as possible.
This coming week will be chock full of economic events and financial reports. First-off, U.S. President Donald Trump is expected to address the nation and promise a large infrastructure program. Likewise, about a fifth of S&P 500 companies are expected to report this coming week. Wall Street will be flooded with financial reports from key companies and it will be interesting to see whether that will slow momentum. The high profile firms include the reports of the tech powerhouses, AMZN, AAPL, GOOGL, and FB on Wednesday and Thursday. Large crude producers, CVX and XOM will be releasing their numbers on Friday.
On the monetary policy front, the Fed is expected to leave interest rates unchanged on Wednesday in the last central bank meeting to be chaired by Janet Yellen. Jerome Powell will be taking her place at the end of the week. The Fed is expected to raise interest rates in March, in what is projected to be one of three rate hikes this year.
Without a doubt, the idea of “selling the news” is already nestled into the earnings reports of the large tech companies, but the broad undercurrent of support is so strong that even if we see selling pressure develop against the backdrop of companies’ numbers, it won’t last very long.
The best tack now is to continue to hold stock as long as possible. There’s no doubt that one day the big rally will reach its fateful end, but until that day comes, in the meantime you can accrue profit to buffer against an inevitable future reversal.
Have a great trading day!