Buy in May dip, not go away: AMZN, FB, LNKD, MNST

Buy in May dip, not go away: AMZN, FB, LNKD, MNST 

Wall Street's wisdom says " sell in May and go away". Every year this time, this old sayings seems to be a self-fulfilling prophecy, creating huge market panics.

However, since the end of Great Recession in 2009, last 7 years, Sell-in- May worked well 4 out 7 times: S&P500 dropped 17% in 2010; -21.5%  in 2011;-10.5% in 2012; -12.5% in 2015. Unlike 2016, these 4 times have no meaningful corrections prior to May-October market chaos. From this market internal mechanism, Sell-in May and Go-Away may not work well in 2016.

Also leading stock firms reported solid earnings so far: Amazon, Facebook, LinkedIn, Monster beverage, Baidu, among others, with these stock prices having been reacted well to earnings reports. As long as there are such leading stocks leading market parade, the chance for big market drop should look dim, but not guarantee.   

Granted,  Q1 GDP(+0.5%) growth looks much better than 2011 Q1's -1.5%, so market may not happen 20% drop correction like year 2011. For 10% market correction, buy-dip makes good sense. But this depends on what stocks you will buy. 

Currently, markets may bounce from 3-5% pull back as said in last blogger. Growth investors can consider buying following stocks in weakness: AMZN, LNKD, FB, MNST, TYL, etc.

Gunning Ju

Market Analyst

4/30/2016 from New York     

Why the stock market wants to hit new highs?

US stocks on Friday diverged, with industrial and technology stocks moving the opposite way. Microsoft, Google, IBM dropped after Q1 earnings reported lower than expected, causing the other technology stocks sell-off. Meanwhile Norfolk Southern broke-out under solid earnings report, providing other transport shares a cordial. Dow rose slightly, the market rotated of the tech sector into industrial shares. At this time,  Dow is just an inch away from a new high while  NASDAQ stocks still has to go another 6% to the new high ground.



Historically, Dow and S& P500 are the first to enter weak season, while the Nasdaq follows suit. Dow benefited from strong emerging market and commodity market bottoming out and rebounding, but technology stocks are affected by short-term currency exchange rate adjustments.  To my view, this currency adjustment should not be able to control fluctuations in the overall market longer-term. After all, Microsoft, Google, and IBM are not market leaders. And Facebook, Tesla, etc. may determine the genuine intentions of the market next week or so.

Since the stock market enters the weak season and is unwilling to compromise, this indicates  its strong inherent intention to go new high. Current Fundamentals are comparable to 2009 after the bear market bottomed out, with the market anticipating  improved fundamentals  3-6 months forward; while the index technically parallels to 2012, with market psychology up to 47% bearish not a bad thing. Because there are ample uncertainties in an election year, the market seems to slowly digest those uncertainties and create an antibodies.

 

The market may need 3-5% correction, or may not need, and then continue another 3-5% up after a new high. After that, there will be an chance for intermediate 10% of the correction.


Trim some position with 15%+ return ,and wait for ER. 

Gunning Ju

A long time market analyst
4/24/2016 from Flushing, NYC 

Will 2016 Parallel 2012?

                                             Will 2016 Parallel 2012?

US markets seem stalled past week after robust splinter from February low. Although markets officially enter the seasonal volatile season with unknown variables lurching out sooner or later, it seems that a blowout headwind markets face still is miles away for the time being if there is one.

So how and what uncertainties markets need to digest so that it can breakout to new high ground while ignoring all negative news?

·         Unlike 2012, this year markets still stay below proceeding high. i.e., technically, markets may be still a correction market rally.

·         2012 was Euro zone big flounder in addition to US presidential election drama; 2016 also has an uncertainty of Euro zone—Britain exit of European union, called Brexit (June 23), plus Deja Vu presidential election.  

·         Also markets seem to well understand the impact of Brexit and US presidential elections and will gradually discount these uncertainties.

·         The 13% market run from February low has discounted most of previous overreaction to interest rate hikes and fundamentals. Markets know that fundamentals are neither so bad, nor so good, keeping Ms. Janet Yellen still for a while.

 

Next week starts Q1 earnings report season. Solid earnings may offset seasonal market weakness, paving the way for later year market rally. Therefore, investors need to wait for solid ER, or conservatively buy 5-8% dip during volatile May—October season.

 

Gunning Ju

4/9/2016 from NYC