After May Swoon, Look for Bounce in June…And Sell Into It: Roberts
The U.S. economy is slowing, fears of a debt-ceiling debate are rising and Europe is a mess. Yes, it’s beginning to look a lot like summer 2011.
Last summer, you’ll recall, major averages fell nearly 20% from late July until bottoming in early October. Recent market action has some pundits calling for a repeat, if not something worse, especially as the Fed’s Operation Twist expires on June 30.
“Things could potentially get worse” but, for the moment, the S&P (GSPC) appears to have held support near 1300, says Lance Roberts, CEO of Streettalk Advisors. (In early trading Thursday, the index was testing that level yet again, recently down 1% at 1300.64.)
If the 2011 pattern holds, Roberts says May’s swoon should be followed by a bounce in June, which would give investors an opportunity to raise cash.
“Generally after big sell-off you get one good bounce, another sell-off and that’s where you’re going to find your buying opportunity, most likely sometime between August and September,” he says.
If and when the S&P breaks 1300, Roberts expects the index to fall into the 1200-1250 range. “If we get below 1200, it’s a totally different conversation.”
They may be self evident but Roberts cites four major “headwinds” facing the market this summer:
The first three issues have been discussed at length in recent segments (see links above) and Thursday brought another round of weaker-than-expected data, including: a downward revision to first-quarter GDP (to 1.9%), lackluster ADP employment data and rising jobless claims, as well as a disappointing Chicago Purchasing Managers Index.
“Be careful here,” Roberts says, advising investors is to “treat your portfolio like a garden,” by pruning the winners and treating losers like weeds. “If I don’t take my weeds out of my garden they’ll eventually take over the garden.”
Investors suffering through big losses on big-cap names like JPMorgan (JPM), Morgan Stanley (MS), ConocoPhillips (COP), Research In Motion (RIMM) and, yes, Facebook (FB) would be wise to heed such advice.
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