The Daily Decision for 7.10.18 - All About The Growth?

The State of the Markets:

Don't look now fans, but the S&P 500 is up three days in a row and has finished in the green five of the last seven sessions. This in the face of all the trade fears and hand wringing about the potential impact an extended trade war would have on the economy. As such, investors appear to have a little more spring in their step right now.

Some folks are calling the recent string of green screens a result of a little something known as "buy the rumor and sell the news." Only this time the adage has been turned on its head as traders sold on trade war fears and now appear to be buying on the idea that reality won't be as bad as expected.

Yet, as I opined on Monday, I think there is a lot more at work here than some age-old Wall Street trading strategy. As in, growth trumps trade fears. In fact, it's been my experience that growth can trump just about any problem a business or economy might have.

Got a financial problem? No worries. If your revenue is growing, the problem will likely shrink or even disappear over time.

So, despite the fact that there has been no movement on the trade front with China and the Europeans appear to be hopping mad about the current tariffs, the stock market is advancing. Why? Because in short, growth can fix everything.

We Can Afford the Trade War

Another way to look at this situation is that with the economy humming along, the U.S. can actually afford to mess around with a trade war for a while. So what if GDP loses a few tenths of a percent this year? It looks like we've got a few extra tenths to spare.

Yep, that's right; the current little rally in stocks appears to be driven by the idea that (a) the economy is growing at a strong clip, (b) inflation has yet to pose any sort of problem, and (c) the Fed doesn't appear to be bent on killing the economy. What's not to like?

It's That Time of Year Again

Then there is the upcoming earnings season. Again, can you say, "buy the rumor?"

In case you've been living in a cave, earnings are expected to be strong once again this quarter. And save a bunch of rhetoric from executives going on about trade, most analysts are looking for big numbers from corporate America over the next couple months.

So, another growth story might provide the bulls with a raison d'etre here. Party on, right?

You Buyin' The Argument?

Yes, I will admit that the tone of this morning's market missive has become a tad sarcastic. My bad. But, sometimes simplicity is what the stock market game is all about - whether it makes sense to you or not. And while the current rationale may sound a little light to some (maybe even me), it appears to be working.

Yet, at the same time, it is important to remember that the bulls are not out of the woods yet from a chart standpoint. Sure, the recent rally has been enjoyable. But there is some pretty hefty resistance just overhead on just about every index.

S&P 500 - Daily

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Yes, the recent improvement in stocks has been fun. And the S&P 500 continues to put in higher highs and higher lows while moving from the lower left to the upper right on the chart. But the question - at least in my mind - is can it last? After all, haven't the bulls been playing the growth card for quite some time now? And as such, shouldn't the growth be baked into the cake by now?

My Take

So, for me, this looks like a good time to hail from Missouri. A good time to make Ms. Market "show me" her hand. Go ahead, blast through the resistance at 2800 and then attack the old highs. Do that with some "oomph" and I'll get on board. I'll buy into the growth game. I'll embrace the breakout. But for now, I'm going to curb my enthusiasm in deference to some pretty weak readings from some of my models.

HCR Awarded Top Honors in 2018 NAAIM Shark Tank Portfolio Strategy Competition

Each year, NAAIM (National Association of Active Investment Managers) hosts a competition to identify the best actively managed investment strategies. In April, HCR's Dave Moenning took home first place for his flagship risk management strategy.

Press Release

Want to Learn More? Contact Dave

A Word About Managing Risk in the Stock Market

Thought For The Day:

To think is easy. To act is hard. But the hardest thing in the world is to act in accordance with your thinking. - Johann von Goethe

We are excited to announce that the latest upgrade to the Daily Decision service began being implemented on Monday, July 9.

The new, state-of-the-art portfolio will be comprised of three parts.

  • 50% Risk Managed Growth
  • 20% Market Leaders
  • 30% Top Gun Stocks

The Risk-Managed Growth portion is made up of three trading strategies and accounts for 50% of the portfolio. The Market Leadership portion makes up 20% of the portfolio. And the Top Guns Stocks portion (10 of our favorite stocks) will make up the final 30% of the portfolio.

All three of our strategies will be run in a single Marketfy model - the model is currently labeled as the LEADERS model. The goal is to make the service simpler to follow by putting everything in one place.

Note that we are in the process of building out the portfolio. The market leaders were already in place in the Marketfy model, we simply needed to reduce the exposure to the targeted level.

Next, we added the Risk Managed Growth section of the portfolio. Two of the three risk management systems are on buys, while one is neutral. Thus, one of the three positions is at 50% of its normal level (SPY is currently 8.5% versus a fully-invested position of 17%).

Finally, we will be looking for opportunities to add 10 "Top Gun" stocks. These are technically healthy stocks that are top rated in terms of earnings strength, company leadership and industry performance.

So, stay tuned, we will be adding positions when e opportunities present themselves.

Today's Portfolio Review:

2018 YTD Performance Update:
Daily Decision Portfolio: +6.8%
S&P 500: +4.1%

Current Rating Explained
This is our rating for the day. The Current Rating tells you what action we would take if we did not currently hold the position. A "Buy" rating means we would be willing to purchase the position at current prices. A "Strong Buy" suggests this would be our first choice to buy. A "Hold" rating indicates we would not make new purchases at current levels. And a "Sell" rating indicates we will likely exit the position in the near-term.

Positions Can Change
Positions often change during the trading session. Remember that we will send a Trade Alert via SMS Text Message and/or Email BEFORE we ever make a move in the models.

At the time of publication, the editors hold long positions in the following securities mentioned: SPY, IJR, QQQ, XLK, XLV, XLY, XLF - Note that positions may change at any time.

Wishing You All The Best in Your Investing Endeavors!

The Front Range Trading Team

NOT INVESTMENT ADVICE. The analysis and information in this report and on our website is for informational purposes only. No part of the material presented in this report or on our websites is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed nor any Portfolio constitutes a solicitation to purchase or sell securities or any investment program. The opinions and forecasts expressed are those of the editors and may not actually come to pass. The opinions and viewpoints regarding the future of the markets should not be construed as recommendations of any specific security nor specific investment advice. Investors should always consult an investment professional before making any investment.

Posted to Daily Decisions Service on Jul 10, 2018 — 9:07 AM
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