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Editor's Note:

(October 4, 2015)

The U.S. market has surged into the fourth quarter of 2015 but investors don't seem to believe the rally.

The September jobs number was an ugly miss with both July and August reports revised lower. Yet stocks rallied on Friday. There was an initial sell-off but the reversal higher was impressive. If you listen to market pundits comment on Friday's move it was a mix of confusion and disbelief.

Overall investor sentiment is negative. The latest AAII survey showed a +11% surge in bearish sentiment. At the same time analysts are bearish on Q3 earnings. Wall Street likes to say a bull market climbs the wall of worry but right now the wall is looking pretty steep and investors seem nervous. We have negative earnings expectations, currency headwinds for major U.S. corporations, and China leading a global economic slowdown. Even the U.S. seems to be vulnerable to the economic decline given some disappointing economic headlines lately.

If I had a crystal ball to see the future I suspect it would show more volatility and weakness for stocks over the next one to two weeks before we bottom and rally through the rest of Q4. That could be wishful thinking on my part. The key will be Q3 earnings results and corporate guidance. The last three weeks of October are swamped with earnings results but we should have a good feel for the tone of earnings season by the 23rd of the month.

I am not adding any new trades tonight. Last week we saw both FB and RCL graduate from our watch list to the active trade section.

Tonight I am adding Costco (COST) and Hershey (HSY) as a watch list candidates.

Radar Screen:
Here is a list of stocks on my radar screen. These have potential to be LEAPS trades down the road if the right entry point presents itself. In no particular order:

MBLY, NKE, UA, BBY, ADBE, LXK, EXPE, JBLU, LUV, TJX, EW, ULTI, LOW, HD, EL, LB,