Posted August 30, 2013 16:40
Now that summer is over, investors will be watching the Federal Reserve monetary policy decision along with the looming debt crisis. The FOMC meeting will announce their decision on September 18th. If the FOMC decides to taper (reduce bond purchases), then I would expect the market to sell-off. The reason is because, once the Fed tapers, investors will feel that the safety net under the market, which is Quantitative Easing, is slowly being removed. With that said, if the economic data improves in the 4th quarter, then I believe that the market will have a nice rally in the 4th quarter.
I would hold off on adding to any long positions until we see a 7-10% correction. I believe that there are enough catalysts to bring the market down through mid-October that will act as a barrier for any significant market gains. I believe that once a correction is seen, that the best sectors for the 4th quarter will be the financials, healthcare, and technology. If you take a look at last month’s blog, I recommended buying the Jan ’14 AAPL $500 call at $8.40. Currently that option is trading at $27 meaning that if you were to sell the option now, the profit would be around 225%. I recommend selling half of your position and then holding the rest into year-end, so if AAPL fails to rally you would still have a realized profit for the trade.
Long-Term Trades: Stocks I Like: SODA, GILD, DDD, AAPL, M, GPS, BAC, MS, FB, BIDU
I would wait for a 5%-10% in the S&P 500 before committing capital to any of the names above.These are all stocks that I like long-term.
