(By Michael Arold) I turned cautious in my last monthly review, arguing that US stocks would need another catalyst to move higher. A potential driver was the upcoming Q3 earnings season. Unfortunately, this catalyst failed to inspire the markets and the S&P 500 Index (SPX) lost almost two percent. My defensive stance, however, resulted in a small portfolio gain.
Going into November, the technical picture is mixed but I'm leaning towards the bullish side. A couple of long positions in my portfolio express this view. Should the market rebound, I expect the weakest stocks to rally the most. Technology had been leading equities lower, so I'm now long the ProShares Ultra QQQ (QLD), the leveraged NASDAQ ETF.
A few sectors held up quite well in October and failed to break their uptrends. US home builders and related stocks are one example. Recent weakness therefore represented a good opportunity to "buy the dip" and I went long Pier1 Imports (PIR). I'm looking to add on the long side for a potential year-end rally.
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Weak Q3 earnings quarter should be priced in by now and impulses could come from the macro side: any positive economic news could result in higher stock prices due to the current negative underlying sentiment. My watch list for additional long trades is filled with various names and I'm ready to put more money to work.
Gold is still very interesting, even though the metal did not manage to break major resistance at $1,800. I will probably add either stocks or a Gold ETF itself in the next weeks. Support at $1,700 is important and the more prices stabilize above this level, the better the intermediate-term outlook.
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Even though I'm usually not a fan of individual gold miner stocks, the sector has been outperforming the metal in recent weeks and might be a good investment going forward. My favorite play here is still Royal Gold (RGLD), a royalty company, which I discussed in earlier reviews.
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