Pause or Problem?

Selloffs are never fun, but they are oftentimes necessary. And we’ve been waiting a while for this one. Stocks have been soaring since the election with some tepidness showing up just recently. And today it finally happened: the major indices each dropped by more than 1%, marking the worst day of 2017 so far. The S&P was down 1.24% to 2344 and the Dow dropped 1.14% (or nearly 238 points) to 20,668. The NASDAQ got the worst of it with a slump of 1.83% to 5793.8.

So is this just a pause in the bull run, or a problem that suggests a bear market is about to begin? With economic fundamentals strong and employment low, the editors are still firmly in the former camp. Until there are other problematic signs, this pullback seems to be just a normal function of the market and a good excuse to pick up stocks at a bargain price. However, the House’s health care vote on Thursday now becomes a big factor on stocks’ direction in the coming weeks, since the passage of the Republicans’ plan is seen as the first step in all the pro-growth policies that President Trump has promised.

Today’s Portfolio Highlights:

Stocks Under $ 10: Internap (INAP) is hanging around its 52-week high, but Brian is expecting a lot more from this Internet connectivity services company. Over the long term, the editor believes that this Zacks Rank #2 could trade over $ 5, instead of around $ 3.65. However, he’s not moving into this name too much since he sees the stock as somewhat liquid. Get the full details on this new addition in the complete commentary.

TAZR Trader: After a major brokerage firm upgrade to Buy, shares of FireEye (FEYE) jumped off its all-time lows yesterday and through $ 11/share. Kevin sees an opportunity in this cyber-attack security company, so he added it this morning with a 7% allocation. Read the complete commentary for a lot more on this new addition, including its sales outlook and its takeover speculation.

Zacks Short List: The portfolio swapped out two names in this week’s realignment. It short-covered AMZN and GDDY, and then replaced them by buying CF Industries (CF) and Anadarko Petroleum (APC). Learn more about this emotion-free portfolio that takes advantage of falling and volatile markets by reading the Short List Trader Guide.

Reitmeister Trading Alert: “Don’t worry friends. The bull market is still firmly in place. Tuesday’s selloff is just another phase of the consolidation under 2400 that started March 1st. During these consolidations we see investors rotate money from group to group on some days. And on other days they take excess profits away from the recent big winners.

“Simply stated, the smaller, riskier, growthier, cyclicalier, Trumpier and Risk On’ier the stock, the more it went down Tuesday. Those with less of those attributes did better. The good news is that during the next Risk On session you will likely see all of Tuesday’s biggest losers become the biggest winners (and vice versa).

“In general, I see these dips as excellent buying opportunities. And if already fully invested, as we are, then just stay the course. Your odds of perfectly timing exit and re-entry are very low.” — Steve Reitmeister

Options Trader: “There’s probably some concern over the upcoming vote on the repeal of Obamacare. Why is this so important? For starters, it does represent 17% of the US economy. But the other reason is that the tax cuts are in queue after the health care initiatives pass. So any delay in the health care stuff, could delay the tax stuff, which is what the market is most bullish on. I don’t think either one is in jeopardy.

“But like above, the market was looking for an excuse to pull back some and this was a built in excuse to do so. Next support comes in at 2,340 (bottom of a bullish flagging pattern), then 2,325 (the 50-day moving average), and then 2,275 (top end of a consolidation range at the beginning of this year and end of last).

“I don’t think we need to go all the way down there. Should find support at the higher levels. But I also think if the health care vote goes thru, the market will refocus on the tax cuts and that could lead to a whole new leg up. I would not be overly concerned about today’s price action. Instead, I’d be looking for stock bargains. And that’s exactly what I’m doing.” — Kevin Matras

Have a Great Evening,
Jim Giaquinto

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