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.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV