Reitmeister Answers Key Investor Questions

NYSE: SPY | SPDR S&P 500 ETF Trust News, Ratings, and Charts

SPY – The recent stock market (SPY) volatility has created a lot of confusion amongst investors including a concern that this bull run is over. 40 year market veteran, Steve Reitmeister, answers the key questions on investors minds at this time including why the market is pulling back from the highs? And whether its time to buy once again? Get all those answers and more in the new commentary that follows…

(Please enjoy this updated version of my weekly commentary from the Reitmeister Total Return newsletter).

Stocks continue on their volatile path since hitting record highs at 4,500. Or to be more exact, this has been going on since the middle of March when the Russell 2000 made new highs (and now -5.6% below that level).

Why is this happening? And what should we do about it?

The answers to those pressing questions and more are explored in detail below.

Market Commentary

Let’s do today’s commentary in Q&A style. I think this will be a good way to cover the key issues at hand.

Q: What is the main reason that stocks are down from the all time highs?

A: There are actually many reasons that investors could point to at this time. None of which is truly a long term bearish case. Just all semi-interesting reasons that would lead to this near term pullback before the next leg higher. Here are those reasons in order of importance:

4,500 = Resistance: This is a pretty good milestone for the market that would naturally lead to a round of profit taking that culminates in a period marked by pullback or correction along with ample sector rotation. We saw the same thing happen at other major levels like 4,000. So nothing truly ominous in this action. Just part of the markets natural ebb and flow.

Supply Chain Concerns: We haven’t talked much about this concept to date. However, it first came to my attention, not from the media, but from a good friend of mine who works in the factory automation industry.

Through his job at a leading S&P 500 company he has a pretty good purview into the state of the nation’s manufacturing sector. He recently told me point blank that he sees the potential for the supply chain constraints to cause a recession in the not too distant future.

Shortly after his comments I see the supply chain issue making it to the mainstream media in articles like this one. With all other economic indicators looking positive, this black swan type event to derail the economy is one to watch. Likely, because it is on enough people’s radars, the issue will be solved before it truly harms the economy. However, we owe it to ourselves to be mindful of this one because if it does worsen, then stocks will indeed head markedly lower.

Rising Inflation > Rising Rates: We have talked about this one many, many, many times in recent commentary. Even though there is good reason to believe that most of the inflationary pressures are transitory, you see acknowledgment from Fed Chairman Powell, that it may be lingering around longer than previously expected.

This explains the Fed’s more hawkish views of late which the market is FINALLY appreciating through the movement of 10 year rates (up from 1.3% to 1.53% in the past couple weeks). Yet, here again, the historical facts are still quite bullish in the face of this news as spelled out most recently in my 9/28/21 commentary.

Q: Reity, aren’t you worried about the debt ceiling?

A: That is a big, fat NO!

That’s because we have been to this DC Rodeo dozens of times before. They always make a last second deal and life goes on. Wall Street is quite aware of this “boy who cried wolf” routine and are not buying the fake cries this time around.

Q: So why are tech stocks so weak?  

A: Because a longer term consolidation period like now comes hand in hand with sector rotation. So the longer the consolidation goes on, the more likely you are to see just about every group getting rough treatment. Given that tech stocks have been so strong, for so long, then they have quite a bit of excess to give up during a sector rotation period.

No doubt this haircut for tech will culminate in an attractive “buy the dip” opportunity for the best names in the group. However, it doesn’t mean that EVERY tech stock will be attractive. It’s still prudent to have an eye towards the strength of their earnings outlook combined with reasonable valuations. Meaning that a stock that is overvalued by 50% and gets sold off by 20% is still quite overvalued and should be avoided.

Q: Does the economic outlook still support a bullish environment?  

A: YES!

During the past month there were some minor reports where results softened a touch. Thus, it was important to see how the vital national reports came out to start October. Gladly the economic report card is very impressive at this stage including a 61.1 reading for ISM Manufacturing on Friday coupled with an even more impressive 66.7 showing for the forward looking New Orders component.

Today we found out that the services sector is even more impressive as ISM Services rang up a 61.9 reading with 63.5 for New Orders. Both of these results were well above expectations.

Net-net when added together it tells you the economy is humming right along and that should show up in the Q3 earnings reports that will start rolling out later this month.

Q: How about the technical picture of the market…how is that holding up?   

A: The last 4 sessions has put the 100 day moving average under strain. Yet we closed today clinging to the underside of that level.

Here are the updated key technical levels at this time:

4,440 = 50 day moving average

4,351 = 100 day moving average

4,144 = 200 day moving average

Q: Reity, what is your recommended trading plan at this time?    

A: The long term outlook remains bullish with this current period being a fairly natural pullback period coupled with ample sector rotation. Thus, it says to keep our bullish bias in place.

Yes, stocks could go lower. And yes, the pullback could last longer. But just as well, it could bounce back with a vengeance at any time ready to make new highs above 4,500.

So unless we see greater concerns about the supply chain and potential negative effects on the economy, then I will keep fully invested expecting the bull market to kick back into gear sometime soon.

Often it is the proof of yet another positive earnings season that acts as a catalyst to remind people of the bullish elements at play. If true, then stocks will likely be heading higher before October comes to a close.

What To Do Next?

Start a 30 day trial to the Reitmeister Total Return portfolio.

Why?

Because it has beaten the market consistently over time. Here are the specifics as of 9/28/21:

Time Period RTR Gains S&P 500 Gains
1 Month +0.82% -3.89%
3 Months +5.41% +1.42%
Year to Date +29.54% +15.88%
1 Year +49.54% +30.50%

Where does the outperformance come from?

Because I have been a successful investor for over 40 years. And I have used that knowledge to hand select 12 Buy rated stocks and 2 ETFs ready to excel in the days and weeks ahead.

If you would like to see the current portfolio, and get my next trades, then start a 30 day trial by clicking the link below.

About Reitmeister Total Return newsletter & 30 Day Trial

Wishing you a world of investment success!


Steve Reitmeister

…but everyone calls me Reity (pronounced “Righty”)
CEO, Stock News Network and Editor, Reitmeister Total Return


SPY shares . Year-to-date, SPY has gained 16.97%, versus a % rise in the benchmark S&P 500 index during the same period.


About the Author: Steve Reitmeister


Steve is better known to the StockNews audience as “Reity”. Not only is he the CEO of the firm, but he also shares his 40 years of investment experience in the Reitmeister Total Return portfolio. Learn more about Reity’s background, along with links to his most recent articles and stock picks. More...


More Resources for the Stocks in this Article

TickerPOWR RatingIndustry RankRank in Industry
SPYGet RatingGet RatingGet Rating
.INXGet RatingGet RatingGet Rating
DIAGet RatingGet RatingGet Rating
IWMGet RatingGet RatingGet Rating
QQQGet RatingGet RatingGet Rating

Most Popular Stories on StockNews.com


:  |  News, Ratings, and Charts

10 Best POWR Ratings Stocks

Investors love using our POWR Ratings to track down stocks likely to outperform the S&P 500 (SPY). However, on any given day there are over 1,300 that are Buy rated. This leads customers to reach out to us to discover which are the BEST of these stocks. Today I share the answer including details on the current 10 best POWR Ratings stocks. Get the rest below...

:  |  News, Ratings, and Charts

Are Stocks Ready to Break to New Highs?

The stock market (SPY) is on a 5 day winning streak and now less than 1% away from the all time highs. This quickly shakes off weeks of painful pullbacks and volatility. Is the market truly ready to ascend to new heights or is this another fake out before the next leg lower? Find out the rest below...

:  |  News, Ratings, and Charts

TTSH is this Week’s Featured Stock 

The Tile Shop Holdings (TTSH) is a leading specialty retailer of manufactured and natural stone tiles. The company has staged an impressive earnings turnaround. Read more to find out why the stock is a good buy into year-end.

:  |  News, Ratings, and Charts

Buy These 3 Tech Stocks Before They Soar Further

Tech stocks, which were underperformers at the start of the year, have made their way back as investors have been buying on the dip. Many of these stocks, which include Applied Materials Inc. (AMAT), KLA Corporation (KLAC), and Amdocs Limited (DOX) are currently in an uptrend and are expected to continue this momentum.

:  |  News, Ratings, and Charts

TTSH is this Week’s Featured Stock 

The Tile Shop Holdings (TTSH) is a leading specialty retailer of manufactured and natural stone tiles. The company has staged an impressive earnings turnaround. Read more to find out why the stock is a good buy into year-end.

Read More Stories

More SPDR S&P 500 ETF Trust (SPY) News View All

Event/Date Symbol News Detail Start Price End Price Change POWR Rating
Loading, please wait...
View All SPY News