Where to find opportunities in the quiet of the market
You have to be wary of sleeping water.
The S&P 500 may have barely budged in the past week, but Oppenheimer’s chief technical analyst Ari Wald said it was part of a familiar pattern for markets that could set the stage for the ground for a more energetic end of the year.
“Over the past 30 years, the market has tended to take a break in mid-November before strength picks up in December through the end of the year,” Wald told “Trading Nation” of CNBC Monday.
Wald said this consolidation is a “simple reminder” that bull markets don’t always move in a straight line and that sideways action can be a normal and necessary process.
“The most important bright spot for us is what we see in our internal scale as well as in our leadership metrics that corroborate this bull market that we believe we are still in,” he said.
Gina Sanchez, chief market strategist at Lido Advisors, said a market break made even more sense this year beyond seasonality.
“If you look at valuations, if you look at earnings, if you look at GDP growth expectations, when all are definitely positive, they’re slowing down. And the markets just haven’t figured out what the reopening is yet. the pandemic is actually going to look like, ”Sanchez said in the same interview.
After falling nearly 14% in 2020, S&P 500 earnings are expected to rebound 48% this year, according to FactSet. This rate is expected to slow to 8% growth in 2022.
Sanchez said the high valuations pushed her towards a “GARP” strategy – investing in growth stocks at a reasonable price. The S&P 500 is trading at 21.6 times earnings futures.
“The market should take a step back and ask, ‘Am I paying a fair price for the growth I expect?’” Sanchez said.
Wald, meanwhile, is turning to the alternative energy space during the market calm. It highlights the TAN solar ETF as a potential spot.
“The ETF has completed its six month base, it went higher earlier this month. It has been more stagnant lately. It has collapsed. We want to buy this break before the strength picks up. Our assumption is that the ETF should trade higher as long as the breakout is intact above the $ 92 support, ”said Wald.
ETF TAN rose 12% over the past month, but remains close to 23% from its peak in January.