(Please enjoy this updated version of my weekly commentary from the Reitmeister Total Return newsletter).

After making new highs at 4,545 back in early September stocks endured an extended pullback with loads of volatility. That seems to be over as stocks broke above 4,500 today and now just a short hop away from the all time highs.

Is the pullback truly over?

Why did this happen?

What happens next?

The answer to these, and other pressing questions, will be tackled in this week’s Reitmeister Total Return commentary.

Market Commentary

Let’s start with the following declaration:

There was NEVER a fundamental need for stocks to sell off. Remember that even during the most joyous bull market, stocks just don’t go up and up and up. So after making new highs above 4,500 it was time for an extended sell off to wring out excesses paving the way for the next leg higher.

The above was said in many ways, at many times by me over the last couple months to explain why we’re not letting go our grip of the bull market. Instead we stayed postured in our favorite stocks & ETFs for the next leg of the bull market to take place so we wouldn’t miss an ounce of upside.

This was definitely the right move because since September 2nd the S&P is down -0.38% whereas the RTR portfolio has a solid +3.19% return.

No this will not put me on the Mt. Rushmore of investing next to Buffett and Lynch ;-) However, it is a statement of why it is important to never lose sight of the primary trend of the market. Because if it is bullish, and you have too much money short or on the sidelines, then you will miss the gains when the bull starts running again.

However, it is also a statement that when the overall market is flat, that means the “average” stock was breakeven. But we have no interest in buying average stocks. That is where the POWR Ratings comes in to point the way to superior stocks that have passed the 118 point inspection that increases the odds of outperformance.

So let’s go back to those questions listed up top and answer them directly.

Is the pullback truly over?

We can not say yes with 100% certainty at this stage. Meaning we could correct once again in the days ahead. However, with this being the 4th straight session closing above the 50 day moving average, and less than 1% from the all time highs, then the odds point to this pullback being over with more gains on the way.

Why did this happen?

Go back to my earlier declaration. If there was never a sound rationale for a decline, then the pullback was always living on borrowed time.

I sense that those looking for a catalyst for bounce higher can look at the early strength of bank earnings last week. This was a reminder to investors that the economy is just fine and perhaps time to start bidding up stocks once again.

What happens next?

If indeed earnings season is the catalyst, then the next step depends on the quality of corporate earnings as we get beyond bank earnings to see the health of the rest of the economy. If positive, then time to make new highs. If negative, then likely this consolidation/pullback period will extend longer.

The key to watch is NOT whether companies beat earnings. That is almost always a given. The key is the guidance for the future because there are fears that more and more companies will discuss concerns over cost of goods inflation or supply chain issues that could hamper the next round of earnings.

Lastly, lets have a roll call of the recent economic events that are certainly a part of the macro equation for the stock market.

First we have the Fed Minutes from last Wednesday making the pathway for the bond buying taper to start in November. Some investors were surprised by the Fed being perhaps a bit more aggressive on this front than they imagined leading to another leg higher on bond rates.

Let me spare you any confusion. RATES WILL MOVE HIGHER as the Fed becomes a smaller and smaller part of the bond buying equation.

Or simply, think of it like this. The word to the wise in investing has always been...“Don’t Fight the Fed”.

Well the Fed would like to see rates start to move higher. And thus will make that happen to tamp down flames of inflation and to try and alleviate the creation of bubbles that often come from rates being too low for too long.

Speaking of inflation we got 2 hot reports from both CPI (+5.4% YoY) and PPI (+8.6% YoY). And yes, PPI is a leading indicator of where the more widely followed CPI will be in the future.

It is for these reasons and more that we have 2 different trades in the RTR portfolio to benefit from higher rates: (tickers reserved for subscribers…start 30 day trial).

Lastly, we see Jobless Claims come in under 300K for the first time Covid. If less people are losing jobs...then more people are keeping jobs...then a great sign of health for employment...which only furthers my point that the weakness found in 10/8 Government Employment Situation was erroneous as all other evidence point to improving jobs picture (more insights on that topic in my 10/12/21 commentary).

The trading plan from here is to assume that the pullback is over with the market likely making new highs in the weeks ahead. In fact, still believe that 4,700 or even 4,800 will be the highs before the year is out. Thus, wise to keep our bullish bias firmly in place.

What To Do Next?

Start a 30 day trial to the Reitmeister Total Return portfolio.

Why?

Because it has beaten the market consistently over time including a robust +32.18% return year to date.

Where does the outperformance come from?

Because I have been a successful investor for over 40 years. And I have used that knowledge to hand select 11 stocks and 3 ETFs ready to excel in the days and weeks ahead.

If you would like to see the current portfolio, and get my next trades, then start a 30 day trial by clicking the link below.

About Reitmeister Total Return newsletter & 30 Day Trial

Wishing you a world of investment success!

Steve Reitmeister

…but everyone calls me Reity (pronounced “Righty”)
CEO, Stock News Network and Editor, Reitmeister Total Return

SPY shares fell $0.03 (-0.01%) in premarket trading Wednesday. Year-to-date, SPY has gained 21.71%, versus a % rise in the benchmark S&P 500 index during the same period.

Steve is better known to the StockNews audience as “Reity”. Not only is he the CEO of the firm, but he also shares his 40 years of investment experience in the Reitmeister Total Return portfolio. Learn more about Reity’s background, along with links to his most recent articles and stock picks.

More...