Stocks could struggle to stay close to nearly five-year highs next week as worries mount about third-quarter earnings and the market appears primed for a pullback from recent stimulus-driven gains.
A bevy of economic reports, including durable goods orders, will grab attention, particularly after the Federal Reserve unveiled its plan on September 13 for a third round of aggressive stimulus to help revive the flagging U.S. economy.
While the action ignited a rally in stocks, analysts have worried that it may suggest the U.S. economy is in worse shape than many had feared.
The Fed's recent action followed a decision by the European Central Bank to support debt-ridden euro-zone nations by purchasing their debt.
With the Fed's decision out of the way, investors are also likely to turn their attention to other issues, including November's U.S. presidential election, he said, and looming decisions about U.S. fiscal policy. (commentary & photo courtesy of Reuters)
This week RSI has selected five recommendations:
Market Vectors Junior Gold Miners ETF (GDXJ)
iShares Dow Jones US Home Construction (ITB)
iShares Silver Trust (SLV)
SPDR EURO STOXX 50 (FEZ)
SPDR S&P Homebuilders (XHB)
The first on the list, GDXJ, has spent over a year in a prolonged decline. Now it is recovering and it is showing a strong 30.8% gain in the past three months. And surprisingly, it also pays a 5.55% yield. My only concern is that it has such a strong run up, I would wait for a pullback from these price levels.
Next on the list is ITB in the home construction sector. Like GDXJ, it has very strong three month gain of 35%. Its strength is coming from investors seeing a future in the home real estate market and money flow pouring into this sector.
SLV is in the precious metal area and like GDXJ it is recovering from a long decline. It is up 28% from its price three months ago and it appears to have broken out of its descending channel. Maybe wait until there is a pullback before buying.
FEZ is up 21.2% in the past three months as it breaks out of its descending channel. This move reflects on investor belief that Europe’s financial difficulties are being solved. Is this wishful thinking or is it reality? We shall see. In the meanwhile, FEZ is paying a 5.15% yield for you to wait for a full European recovery.
Last but not least is another homebuilder fund, XHB. This selection is redundant to ITB, so take your pick. they are both up an identical 30.8%.
Well, there you have it. Catch you next weekend.
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