Trade Prep: New Highs are No Surprise

There’s no shortage of bearish headlines this month.

But that’s not stopping stocks from posting new records and setting up for a powerful fall rally.

The S&P 500 launched to new all-time highs Friday as the Fed reiterated its goal of gradual rate hikes. The reassuring comments from Fed chair Jerome Powell at the Jackson Hole retreat inspired strong buying across the board. As of this morning, only the Dow sits below its all-time highs. Despite the trade war damage inflicted on the industrials this year, the Dow only needs to rise about 3% to break out.

The maket’s impressive August performance is beginning to turn heads as we close out the trading month. In fact, MarketWatch notes that the averages are set to produce their strongest August returns in four years.

Can the market press its gains into the Labor Day weekend?

Here’s your exclusive trade prep for the week of Aug. 27th:

Tactic

The final week of August is typically one of the lowest-volume trading weeks of the year.

But make no mistake: the markets have endured a busy (and noisy!) month. Stocks have added more than a few new bricks to the wall of worry as the S&P 500 and Nasdaq Composite climbed to new all-time highs.

The summer rally has survived an ongoing trade war, presidential scandals and impeachment concerns, high earnings expectations, Elon Musk’s “funding secured” soap opera, and persistent top-calling from prominent analysts. And we still have one week to go before the calendar flips to September!

I can only assume the political noise will get even louder as election season approaches. We should continue to do our best to tune it out. The market doesn’t care who’s running the show in Washington. There are bigger forces at play…

Trade

While Facebook and Netflix remain well below their respective all-time highs, Amazon.com (NASDAQ:AMZN) continues its quest for world domination as it chugs to new all-time highs.

The stock has doubled over the past 12 months. Taking a wider view, we barely notice first-quarter tech correction that tanked the stock double-digits back in March:

AMAZON

But Amazon management knows the company’s not immune to scandals like Facebook’s data breach saga. That’s probably why the company has deployed select fulfilment center employees as social media ambassadors to combat negative stories about long hours, low pay, and infrequent bathroom breaks.

“Everything the employees say on Twitter is positive, sticking to a few talking points like bathroom breaks and compensation,” Business Insider reports. “The program is a sign that the company is taking steps to protect its reputation as it gets tarnished by media reports and tweets from high-profile figures like Sen. Bernie Sanders.”

Even though the ambassador program is superficial at best, it’s good to see Amazon taking its image seriously — especially since many other Silicon Valley giants are losing their mystique and coming under greater investor scrutiny.

With its uptrend firmly intact, Amazon remains a hold in our long-term portfolio.

Takeaway

Now is always the most difficult time to invest.

When it comes to putting money to work in the markets, it’s easy to procrastinate. You can always find a negative news story or bearish data point that could convince you to sit on the sideline and wait for clearer skies.

As we’ve witnessed this summer, the market’s never perfect. But that hasn’t stopped us from diving into more than a handful of profitable trades. Sure, we wouldn’t have lost a dime if we sat on our hands in July and August. But we also would have missed out on plays like Chipotle Mexican Grill (NYSE:CMG), Advanced Micro Devices Inc. (NASDAQ:AMD) and Kohls Corp. (NYSE:KSS).

I have more than a few potential breakout trades in my crosshairs this week. Get ready to end the month with some quick gains…

Sincerely,

Greg Guenthner

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Greg Guenthner

Greg Guenthner, CMT, is the editor of Opening Bell Fortunes and Seven Figure Signals. He has been with Agora Financial/Seven Figure Publishing since 2005. In 2019, the average position in Greg’s Sunrise Fortunes portfolio outperformed the S&P 500 by 1.65x.

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