What The Market Wants: This Could be THE Week

The S&P 500 really cut it close yesterday.  Much like last Friday’s measly comeback for +0.1% gain for the week, it gained +0.22 points, up a whopping +0.016%.

This performance was seen across many indices. If you added up the changes in all major markets over the past 24 hours, you will get very close to zero!  Hang Seng up +0.2%, Nikkei down -0.4%, Shanghai down -0.2%, FTSE 100 up +0.09%, DAX up +0.31%, CAC 40 up +0.07%, NASDAQ down -0.16%,and the  DJIA up +0.29%.  Wow, the Dow was the place to be!

Ok, trying to get serious.  There was an alarming lack of action, as volume was abysmally low.  The NYSE didn’t even reach 650M shares!  There simply was no important news that impacted the market.

Maybe the market will increase its participation later this week when we get retail sales numbers today along with business inventories and, perhaps most important, FOMC minutes.  Wednesday, we get another look at prices through the lenses of export and import prices. Thursday, brings another look at initial jobless claims along with the Producer Price Index (PPI).  And Friday, we get yet another look at prices through the Consumer Price Index (CPI) (will there be inflation?). On Friday, we also get the important industrial production figure along with capacity utilization.

While last week’s economic data provided little pockets of positive news (ADP Employment, initial jobless claims, and ISM) along with little pockets of negative news  (factory orders, consumer credit, and weak European GDP), perhaps this week will provide something more concrete for investors. Now that the markets continue to hang near their highest levels in recent years and valuations generally remain quite reasonable (assuming modest continued domestic growth), we may finally break through the chart’s technical barriers; but, if inflation rears its head or other economic news largely disappoints, we could lose our gains of the past 2 months. This could be THE week!

If so, it isn’t clear whether the direction, if upward, will be in Small-caps, which led last week regaining all of its past month’s loss rising +1.9% in the value category, or if it will return to the Large-cap Growth style, while down -0.4% as last week’s loser, has led the last month gaining +1.9%.  Consider Apple’s (AAPL) new iPad release or General Electric’s (GE) highly positive guidance of double digit global revenue growth.

Will the sector of choice be last week’s leader, Consumer Discretionary (up +1.24%), or the Sabrient Outlook leading sector, Finance (see tables)?  Of course, if the market falls sharply it would likely be led by last month’s loser Basic Materials and Small-cap stocks.

So many questions, so few certainties.  Buy well-priced stocks and stay hedged.

4 Stock Ideas for this Market

This week, I created a custom search with MyStockFinder, emphasizing high value, high growth, high earnings quality, momentum, recent analyst revisions, dividend yield and only Large- and Mid-caps.  Here are four stock ideas for your consideration:

Chemtura Corp. (CHMT) – Basic Materials
Western Refining, Inc. (WNR) – Energy
Footlocker, Inc.  (FL)—Cyclical Consumer Goods & Services
Interpublic Group of Companies (IPG)—Cyclical Consumer Goods & Services

Full disclosure:  The author does not hold positions in any of the stocks mentioned in this article.

Disclaimer: This newsletter is published solely for informational purposes and is not to be construed as advice or a recommendation to specific individuals. Individuals should take into account their personal financial circumstances in acting on any rankings or stock selections provided by Sabrient. Sabrient makes no representations that the techniques used in its rankings or selections will result in or guarantee profits in trading. Trading involves risk, including possible loss of principal and other losses, and past performance is no indication of future results.