This market of ours will instantly compromise your standing among peers should you remain bearish for more than a week. You are made to seem like that old man at the hardware store telling kids to stay away from his inventory of porcelain toilets and urinals. Aged, decrepit, behind the times.
As discussed in my August client letter, despite the new highs in the primary indices, the setups in individual stocks across the board is perhaps as unfavorable as any point during this bull run that started in 2009. You are essentially taking one unit of risk for three-quarters of a unit reward in most situations. Getting 1 to 1 has become rare. It used to be that finding risk/reward opportunities that offered up 1 unit of risk for 3 units of reward was somewhat commonplace. The signs of an aging bull market. Don't get me wrong, aging doesn't mean anywhere near ending. It just means that it is no longer young and glowing in nature.
In the following charts I will demonstrate why I have taken the stance of the old man in the hardware store, raising my voice at the first opportunity, warning of the dangers of using garden tools without eye protection. In order to save face, I will end by unfastening my overalls and reviewing my two favorite growth names.
Let's begin by looking at the Nasdaq Composite, which I will unabashedly admit to having believed, just a month ago, would be much lower than where it is actually trading at the moment. This conundrum offers us new reason to be cautious as discussed below:
click chart to enlarge
NASDAQ COMP
Next we look at the S&P, which is just hanging around an important technical point that could cause it some grief in the near term:
S&P 500
And now the Dow. Another floater:
DOW
Let's now turn our attention to two simple reasons to be optimistic. My favorite growth names, in the form of FB and TSLA. By no means should an investor expect both of these to make them an abundance of capital over the next few months. They could very well be prone to a pullback, which would be perfectly fine. However, if you are a believer in this bull market over the long-term, as I am, then these are the names that you want to be concentrated in. FB and TSLA lead the pack. Innovative, growth oriented, trail-blazers of Silicon Valley that are equal parts fundamental and technical prowess. Let's review:
FB
TSLA
