My Gut Feeling for Today, May 9, 2024

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I am back from my travels which took me north and then south and east. I can tell you that the consumer is out in full force, wherever I went. The impact of the payroll tax increase was fleeting and offset, at least psychologically, by the decline in energy prices. I get to stay at home base for about a week, however, the next week will be spent doing my public duty as a jurist.

After a powerful rally of nearly 100 S&P 500 (SPX) points in the past two months, we may be ready for a little rest and sideways action. Earnings season for the most part is in the books. There are no major economic announcements and no other events to trade off of, such as central bank meeting till June. This will enable us to take a little off the top, enjoy the NBA and NHL playoffs and participate in the college graduation season which is upon us.

If the rest begins today, it is hard to say. The SPX is on a five-day rally and statistically, according to my data, has a 55% chance of extending to a sixth day. That was the same data that warned NOT to sell in May and go away.

Recall that I stated on April 1 that: “As we enter the second quarter, I am not so certain that the strike in tech will continue. Nor am I expecting a post-April pullback as we have seen the past few years. In fact, I am increasing my target on the SPX to 1,650 for the end of the year with a 1,600 target by the end of the second quarter. While that is just a 2% increase, it does leave room for a small 2-3% pullback sometime in April or May. On the other hand, I am expecting strong tech earnings which will allow the NASDAQ 100 to play catch-up. The dividend binge will continue but might begin to peter out. Bond yields on the long end will continue to drift higher but not enough to stem the tide of cash flows into equities.”

Well, tech is back in favor and we blasted through SPX 1,600. For added measure the Dow Jones Industrials (DJI) eclipsed 15,000 for the first time. For trivia buffs, the DJI crossed over 1,000 for the first time in November 1972. The dividend buying binge seems to have peaked. On an intra-day basis, the SPX did decline by about 2% in early April. Remember when the serial top callers and technicians were out in full force back then?

The time to put cash to work was after that first week in April, which I did with both hands. I went from having a multi-year maximum level of cash to running my cash down to less than 1% this week when I increased my allocation to financials. Now I am back to cash raising mode. I will raise about 1% today as I plan to slough off a little Google (GOOG). Then, I will raise more cash either via identifying stocks that have reached their price targets or as a matter of normal risk management by raising 1% for every increase in the SPX of 1%.

Weekly unemployment claims will be released today but I do not see it as a market mover. The most exciting earnings release will be Dean Foods (DF) and Priceline.com (PCLN), so that tells you something about the slowness of the calendar.

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Disclosure: At the time of this commentary Scott Rothbort, his family and/or clients of LakeView AssetManagement, LLC was long GOOG and PCLN stock— although positions can change at any time.

Scott Rothbort is also the publisher of the LakeView Restaurant & Food Chain Report, a newsletter focusing in on food, restaurant and agricultural stocks. You can subscribe at www.restaurantstox.com

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You can email Scott at [email protected]

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Scott Rothbort

Scott Rothbort has over 25 years of experience in the financial services industry. He is the Founder and President of LakeView Asset Management, LLC, www.lakeviewasset.com a Registered Investment Advisor specializing in customized separate account management for high net worth individuals. In addition, he is the founder of TheFinanceProfessor.com www.thefinanceprofessor.com an educational social networking site where his blog also resides; and, publisher of The LakeView Restaurant & Food Chain Report www.restaurantstox.com , a newsletter focusing on investment and trading ideas in the food, restaurant and agricultural sectors. Mr. Rothbort is also a Term Professor of Finance at Seton Hall University’s Stillman School of Business, where he teaches courses in finance and economics; is the Chief Market Strategist for The Stillman School of Business; and, the co-supervisor of the Center for Securities Trading and Analysis. Feel free to reach out to Scott Rothbort by email at [email protected]