What About the Rest of 2013?

06/19/2013 8:30 am EST


Jeffrey Hirsch

Editor-in-Chief, The Stock Trader's Almanac and Almanac Investor

Jeffrey Hirsch, from the Stock Trader's Almanac, updates his outlook for the stock market as we enter the second half of the year.

My guest today is Jeffrey Hirsch, and we're talking about the state of market in 2013. Jeffrey, I read at the very end of the year you were interviewed by a lot of people who always want to know what the Stock Trader's Almanac thinks about the next year, and at the time you seemed to be a bit cautious. You were worried about what January was going to bring.

I kind of read in between that if you felt like the January barometer was pretty good, we might be in pretty good hands. Are you still hopeful now that we're over 15,000 in the market, or do you think we should be a little more cautious than most people?

I think we should be a little more cautious. That kind of action gets my contrarian antennae purring.

The talk I gave today...I like to take a little straw poll. I take advantage of it. And you know, the room of what, a couple hundred people or so, maybe three to five hands went up when I asked who's bearish, and the rest of them were bullish.

That's scary.

That's what I look at. But what we were looking at in December when we made our Iowa forecast was a sequester, the year-end deadline...and things were pretty murky. So admittedly the tea leaves and crystal ball were less clear.

So we put out three scenarios: the base case scenario, you know, plus or minus 5%; the good case scenario, you know a little bit more than that; and the bad case, if things were to fall apart and Washington were to basically be detrimental to Wall Street, we might get the beginning of a more substantial bear market.

In January, we had the Santa Claus rally come in positive, the first five days, the January barometer all positive, the trifecta of indicators. So on January 31, we put out our alert on the January barometer's official reading. We went to the good case scenario...so we figured we would get into new marginal new highs for the Dow and the S&P, Nasdaq about 3,300.

That's where we're at right now, and now we have our seasonal sell signal. Everyone wants to talk about sell in May and go away. We don't go away. We shift our focus. We tighten up stops, we limit new longs, take some profits, let the winners ride, cut the losers, pick up some bond positions.

For retail people, there's an ETF that goes short that we like, the Ranger Equity Bear (HDGE). We like the iShares 7-10 Year (IEF) and the 20+ Year Treasury (TLT), and we also picked up looking for a short position in the financials, the 3x Bear Financials (FAZ).

Are those the major companies?

Those are the big financials, the 3x daily short. You got to be careful trading that. We have a buy limit down...I think it's $33.71. And for the Natural Gas Bear (GASX), a $12 buy limit on that.

We're looking for at least a sideways market. If the market continues to go up, we'll let out longs ride, and if it goes down we've got some short positions that we're getting into.

So sort of protecting the portfolio.

Protecting but being proactive and not going away.

Related Reading:

Double Tops Signal Triple Trouble

Emerging Bonds from Emerging Markets

The Right Stocks to Sell Now

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