There’s no shortage of risks facing the stock market these days, and, frankly, that’s the way we like it.
The way we view it is rather simple, after all – we’re in a bull market, and bull markets rise until the money runs out.
Until that day arrives, however, the market and its well-groomed, professional commentators will continue to worry about just about everything that they can lay their sweaty hands on.
The list of items they harp upon is not so very long, but it is worth enumerating, with the goal that you, dear reader, will not be fooled by the smoke that billows from the portholes of the good ship CNBC Worrywart.
It starts like this –
We in the modern west don’t like the thought of war. It’s very dirty and often bloody and just rankles our consciences so.
Sure, but unfortunately, the rest of the world is not so genteel. And in many cases, they’re just out and out bad. So war will happen – whether it’s on the Ukrainian steppe or in the deserts of the Chaldees – and we’ll see it all on live television, or at least until our reporters and cameramen are rounded up and summarily beheaded.
Bottom line: the market will not be affected by these conflicts. The Russians know well enough not to engage in an outright slaughter of the Ukraine’s military – that might, after all, set off genuine worry in Europe.
As for Syria and the rest of the Middle East, there will certainly be surprises, but again, so little of the U.S. (and the western world’s) economy is dependent upon the region that we really needn’t pay so much attention.
Until it bites us in the arse.
Until then, keep trading, folks, and Twittering and buying Ford F-150’s, for the end is not yet nigh.
2. European Economic Weakness
This one has everyone in a tiff.
Because when the mint starts to print, the recession starts to lessen. [Repeat this with a Johnny Cochrane twang to the tune of any Jacques Brel song you like and you’ll understand where things are headed on the continent].
3. The End of QE
There’s no end to the jabber over QE, and frankly it’s a shame.
Because QE is a non-issue.
The amount of money in circulation that’s actually moving is what the Fed is now focused upon. And as it sees that monetary indicator picking up it will in commensurate fashion withdraw its participation from the market.
Until then the markets will rise.
(Full stop #2.)
How the Fed ultimately extricates itself from the liquidity swamp it has created is anybody’s guess, but the consequences of that problem are still far enough down the road to be ignored at present.
Takeaway: the end of QE will do precisely nothing to impinge upon the market’s rise.
4. November’s Congressional Elections
Some see continued gridlock in the house and senate as a net negative for stocks. After all, with no clear direction for the country, folks might eventually lose faith, or perhaps worse, opt out altogether, as the rising numbers of ‘preppers’ and citizenship renouncers seem to indicate.
Bottom line is the market has flown under Obama’s ‘leadership’ and congress’s navel-ogling. So why should it stop now?
And why should anyone even start to care about what happens in Washington?
5. Japan – World’s Longest Running Deflationary Bonspiel about to get Worse?
With the temporary gains of Abenomics now apparently whittled away, whither Tokyo? Whither Toyota and Lexus? Whither Sony?
Japan has already spent nearly half of the last 25 years in a deflationary funk – not disinflation, or declining rates of inflation, but deflation.
But that never bothered the Dow much, or the NASDAQ.
Simply put, after tsunamis and nuclear meltdowns and a culture that may be among the worlds sickest, our view is that Japan is off the radar for the time being. The one-time island powerhouse could drift back into the negative growth seen over the last twenty years for another twenty-five and nobody would care.
Except the financial media’s chatterboxes.
Don’t pay them any mind. The U.S. stock markets on the rise, and Japan ain’t got the bully to pull it lower.
6. Emerging Markets Trailing off
We’re looking for growth from the BRICs and the MINTs (Mexico, Indonesia, Nigeria and Turkey) to help sustain global growth targets of 3.4% for 2014. But many doubt that they’ll perform as expected.
What if Latin America remains stalled, and India, indeed, fails to deliver as many had hoped? And what if Russia remains embroiled in a mischief that it plain can’t afford economically?
Not a whole lot, we say. Except that money flows to the U.S. will be enhanced, the dollar will continue its rise and American assets will become the last redoubt for a global investment set that’s quickly running out of alternatives.
The real wildcard here is the possibility of an effective jihadi strike on American soil – or worse, a sustained series of strikes.
Should that happen, we could see a sudden and unexpectedly deep pullback.
But either way, the defense sector is going to profit.
Particularly personal defense.
And that’s why we like the looks of a short-sold Sturm Ruger (NYSE:RGR), whose chart is showing a perfect Fibonacci retracement.
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Look here –
• The gun maker registered a deeply oversold RSI reading at the end of July (in red) and has been diverging higher against price ever since (in blue).
• Volume picked up nicely since that point and is now close to double its midsummer daily average turnover (in green).
• And finally, we’ve completed a perfect Fibonacci (0.618) retracement since the lows of roughly five years ago, a move that seals the deal for us.
We’re at the bottom and headed higher folks.
With or without our friends at ISIS.
Wall Street Elite recommends you consider purchasing a speculative CALL on RGR. We like the deep-in-the-money April 35s, now going for $14.00.
With kind regards,
Hugh L. O’Haynew, Senior Analyst, Normandy Research