SPDRs May Not Climb Out of Cup
This column was originally published on RealMoney on Nov. 3 at 11:57 a.m. EST. It's being republished as a bonus for TheStreet.com readers.
With the midterm elections just three trading days away, I think hedge funds and money managers have for the most part already positioned themselves for post-election trading.
After the market absorbs this morning's employment report, I don't expect there will be much movement until after the election.
Meanwhile, I believe it's important to take stock of your current approach to the market.Are you still in the same old names that led the market higher over the past few months? What do you think the chances are that those stocks will continue to lead over the next couple of months? The one constant in the market is that it is always changing. Money rotates from one sector to the other as dictated by the collective opinion of Wall Street about the future health of the economy. Frankly, that's a recipe for confusion. How many times over the past couple of months has the predominant outlook of the market flip-flopped? One day the economic data imply a strong economy that might cause inflation and prompt further FOMC action. The next day we get a different batch of data that contradict that thesis, and the majority starts to believe that the economy may be just weak enough to push the FOMC into dropping interest rates. We're also trying to figure out how this economy affects the market. What matters more, a weak economy or the lower rates that will supposedly result? A strong economy or the inflation and higher rates that it spawns? That virtually all the economic data are subject to revision makes this only more chaotic. So what's a trader to do? I think it's more important than ever to rely on what you are seeing and to remain flexible. Don't try to outthink the market -- maintain discipline. If in doubt, stay out.
Let's look at some readers' picks. A reader asks whether Mid-Cap SPDRs (MDY) have formed a failed cup-and-handle pattern over the last couple of days. That's not how I see this playing out.
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