9:00am (EST)
Let the stampede begin…
Yesterday should have been convincing enough that something real is happening in the market right now. There has been a vast majority of Wall Street analysts, talking heads, hedge fund and mutual fund managers, and chief market strategists who have called for a market pullback over the past month. They have been dead wrong as they told you that the market has “gone up too far too fast”, or “we are due for a pullback.”
Of course, a pullback or correction is in the cards down the road, but we have been spot on since late February about this current market rally. Picking the market’s direction isn’t easy, but if you go through our history of archives you will find we have been pretty accurate in calling the market’s direction for a few years now.
Wednesday’s bounce was further proof that sometimes even the smartest guys on Wall Street can’t see what is happening around us.
They said M&A (merger and acquisition activity) was dead. Walt Disney (DIS, $36.20, up $0.36) bought Marvel Entertainment and there were a slew of other deals that got done in 2009. This has carried over into 2010, and now that there have been even more of them the talking heads will tell you “things are picking up.”
They told you the IPO market was dead, yet we have five great candidates that will still track from 2009 on our Watch Lists. (We like to label IPOs as such for a year until we can get a solid chart on how the stock will trade in future years.) A123 Systems (AONE, $14.26, down $0.35), Rosetta Stone (RST, $25.98, up $0.90) and ChangeYou.com (CYOU, $33.51, up $1.80) are a few big names from last year.
They have told you consumer spending was dead and dining out meant dining in, but the analysts forgot to check with Best Buy (BBY, $45.57, up $0.88) and Chipotle Mexican Grill (CMG, $125.97, up $0.43) or Yum! Brands (YUM, $41.68, up $0.73) who just reported a sweet quarter this morning.
We have seen stock-splits, stock buybacks, clean balance sheets, higher gross margins, and a rebound in technology and corporate spending. And people are gambling. All of this has led to a higher market, but as more people jump on the bandwagon we need to be the rats on the ship on the way down.
We think 2010 will be a banner year for the market, and we recently raised our targets for all of the major indexes to factor in the extra fluff from the current rally. We were pretty aggressive with our target of Dow 11,300-11,400 in our Sunday night Weekly Wrap over the near-term, and we are already halfway there.
As far as Wednesday’s action, the Dow added a triple-digit gain to its current 5-session win streak by advancing 104 points, or 0.9%, to close at 11,123. Bank of America (BAC, $19.40, up $0.73), JPMorgan Chase (JPM, and Intel (INTC, $23.52, up $0.75) are members of the Dow 30 and helped power the index to its highest close since September, 2008.
The S&P 500 finished with a double-digit gain by popping 13 points, or 1.1%, and settled at 1,210. The real story was the Nasdaq which was the clear winner once again. Our target of 2,550-2,600 is within spitting distance. The index soared 39 points, or 1.6%, and closed at 2,504.
[caption id="attachment_5119" align="aligncenter" width="450" caption="NASDAQ"][/caption]We aren’t sure how much longer the current rally will last but remember, the Dow was at 14,000 in 2007 and traded 13,000 in 2008. There is no reason why we can’t go to 12,000 by the end of 2010 if the recovery is real.
The S&P was at 1,500 in 2007 and 1,400 in 2008. We can see 1,350 by yearend. The Nasdaq was at 2,800 3 years ago and could break those levels by hitting 3,000 this year.
These are things to remember when the market pundits tell you stocks have moved too far, too fast but we also realize nothing goes straight up forever. However, we’ll play Jack as long as the beanstalk keeps growing.
We added two new trades yesterday along with the other half-dozen or so we are currently following. Subscribers, check the Members Area for the updates.
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