While the month of October is generally considered to be more volatile, I would not count out stocks remaining strong through the balance of the year. We are soon going to be entering the growth season where the effects of the holidays generally lift the markets higher. As long as we see SPY hold above its long-term 200-day moving average, I would use any pull backs to add new money.
I prefer stalwart dividend paying or low volatility names such as the First Trust Nasdaq Technology Dividend Index (TDIV) or the iShares MSCI U.S. Minimum Volatility ETF (USMV). Both of these ETFs offer a unique approach to identifying quality companies within their respective index constraints.
3. Commodity Conundrum: It's pretty clear that commodities are having a rough year so far in 2013. The SPDR Gold Shares ETF (GLD) continues to show the kind of volatility and lack of direction that make it hard to regain faith in the precious metals. Just when you think the coast is clear, it heads for another ride lower. Right now I am avoiding adding new money to precious metals until we see a more substantive uptrend emerge. However, aggressive traders can use the prior lows as respectable stop loss points for short-term money.
Another sector that appears to be losing steam is oil. The United States Oil Fund (USO) gained momentum during the high-demand summer months and peaked near the expectation of conflict with Syria, but has been moving lower ever since. I would expect that crude oil will continue its streak of volatility and may see some additional deflationary effects if the government shut down lingers and demand continues to wane. I am standing aside for the time being.4. Bond Market Confidence Returns: Ben Bernanke and the Federal Reserve gave the bond market what it needed last month in a boost of support for continued quantitative easing efforts. The Fed chairman signaled that he would not abandon his desire to keep interest rates low and stimulate the economy through their asset purchase programs. This immediately sent the 10-Year Treasury yield plunging lower and stabilized interest rate sensitive investments.
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