Market Commentary and Forecast (Week of August 13th, 2012)

The Olympics are over, the core of Earnings Season is over, what will we do now to fill the void......oh yes, the political season is really just beginning.
Aug. 13, 2012 - PRLog -- The Olympics are over, the core of Earnings Season is over, what will we do now to fill the void......oh yes, the political season is really just beginning.  The Republican's just announced that Paul Ryan will be Romney's running mate as VP.  Should be interesting to see how the markets will react and of course, the pundits response.  The markets have been relatively quiet over the last few weeks working its way up to a possible 4 1/2 year high.   We have been discussing for a while that the political season should push the markets towards new highs, at least through the elections in early November.

Economic reports have been "ok to good".  Nothing standing out as extremely bad or good.  The lack of very bad or good economic news has been keeping investors on the fence, but money is ready to go to work.  Traders and investors are waiting on Bernanke's decision on future Quantitative Easing (part 3) and may get a decision by the end of August at the Jackson Hole economic meetings.  If he commits or eludes to some type of bond buying, this will push the markets higher, above and beyond the political season lift.  If he does not commit to any bond buying, we could see a 2%-4% pullback in the market, which would be a good short-term buying (or accumulation) opportunity.  Dividend paying stocks and ETF's are very strong and expect to get stronger.  Some may say its a "crowded trade".  If thats the case, its been a crowed trade since stocks started paying dividends.  Many investors will move out of dividend stocks into growth stocks when they believe the market is trending and getting stronger to the upside.  We haven't seen any confidence that the bullish action will sustain itself over the next 12-18 months.  The economic numbers and the slow European meltdown has prevented that for now, although our markets will get additional upward movement as European investors transfer money out of their markets and into our markets.  This is why dividend paying stocks (with good yields) will continue to hold and have continued bullish price action.

Market Direction: Our target range on the S&P 500 Index Levels of 1,400 - 1,425 by end of August still stands. A top range on the S&P 500 of 1,420 - 1,440 by the Presidential Elections is expected if the Europeans can begin to agree on bailout amounts and policies for payback (these talks seem like they have substance recently). The "Fiscal Cliff" issue is important, but we are not in the eleventh hour yet (this will be a political talking point for the next 4 1/2 months, enjoy).  

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