The chart of the S&P 500 shows the potential of a small correction of approximately five percent. I would view this as an investment opportunity to buy on weakness.
Chart courtesy of www.StockCharts.com
The reality is that the stock market is heading higher, but we could see some adjournments prior to this.
The economy continues to be steady, but it’s not getting stronger. Investors are okay with this. What is really encouraging is the ramp up in the jobs numbers. In June, the economy created 288,000 new jobs, which easily beat the consensus 215,000 estimate and the 244,000 jobs in May. Better yet, the unemployment rate also fell to 6.1%, the lowest level in nearly six years. The strong jobs report helped to add confidence to the stock market.
The reality is that the stock market is really the only game in town at this juncture. The lack of alternative investment vehicles other than equities is helping to support the stock market. With the 10-year bond yield stuck below three percent (currently around 2.63%), I wouldn’t be rushing out to buy bonds yet. I would rather buy dividend paying stocks.
My advice at this time is to ride the stock market higher, but also keep in mind that we could see a correction, especially if the second-quarter earnings season fails to deliver. At this time, I suggest you only take an opportunity to accumulate shares on weakness, as the bull market remains in place.
This article is brought to you courtesy of George Leong from Profit Confidential.