As of Friday, October 28, 2016 at the close of trading EquitySurge™ has continued a strong buy signal for USA equities.
After the better than expected initial report on third quarter GDP Friday morning, which ignited a decent rally higher in stock prices, the market was dealt a body blow in the afternoon with revelations of potentially new damning evidence discovered by the FBI in the Hillary Clinton private email server investigation. The resulting sell-off reversed the morning’s gains and them some, with the S&P500 Index closing down almost 7 points to the 2126 level. In what has already been a bizarre presidential election, we may now be about to venture even further off the map…
The stock market has been affected by many of the variables and uncertainties related to the presidential election for sometime now, in addition to the variables and uncertainties surrounding the Federal Reserve and whether or not they will raise interest rates again before the end of the year. But even in the face of these unknowns, stock prices have stayed within a few percentage points of the all-time-highs set in mid-August. Liquidity, the measure of money flow into or out of the stock market, has told us throughout 2016 to stay long the stock market and buy any prices dips, and that message has paid off quite well. Liquidity is still telling us to keep buying stock market price dips and sell-offs, even in the face of this latest strange twist in the presidential election.
So rather than get caught up in the election and Fed rate increase dramas, we should continue to listen to the message from liquidity that is telling us to ignore the headlines and keep buying any weakness in the stock market, with the expectation that at some point in the near future when much of the uncertainties plaguing the market resolve, we should see a potentially stunning “catch-up” rally higher in the stock market.
Bottom line: unless the strong message from liquidity to keep buying the stock market radically reverses (which is highly unlikely), we should stay the course and view sell-offs in the market caused by knee-jerk reactions to the bizarre landscape that has become the presidential election 24-hour news cycle as excellent opportunities to buy or add to existing long equity positions.
If you would like to review the EquitySurge™ trading signals generated so far in 2016 please see the Trading Signal Performance Chart page.