Stock market thoughts for this long weekend include big-picture market observations and examples of buyable stocks.
Well, it’s Thanksgiving weekend, so let’s start with the most important topic there is: What cocktail should you enjoy while you’re relaxing this long weekend? One that I brought to my sister’s house for Thanksgiving and I highly recommend is a version of a Casablanca—it’s not overly strong (at least the way I make it) and has a nice balance between sweet and tartness. Plus, it’s simple to make.
I actually mentioned it last December when I made a few for Christmas, and it’s grown on me since. To make it, you want to combine ice with the following:
-2.5 ounces of white rum (doesn’t have to be fancy, but knock yourself out if you want)
-Just shy of 1 ounce of lime juice (not sweetened—just regular lime juice)
-1 ounce of Cointreau
-0.5 ounce or so of maraschino cherry juice (if you’re taking it out of the jar, which I do, I suggest spending money for higher-quality cherries like Stonewall Kitchen or even Luxardo)
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Then you shake the hell out of it and pour it into a glass with a bunch of ice. (I tend to use a lowball glass but whatever works.) Then, I usually add maybe three ounces or so of sparkling water (or club soda) to cut it. It should be a nice light pink color and is beloved by men and women alike.
The great part about this drink is that it’s easy to tweak—if you like it a little sweeter, add a touch more cherry juice. Prefer sour? Add more lime juice. And, of course, you can cut it more/less with the sparkling water. The way I make it above, each” batch” should probably make a bit more than two drinks depending how much sparkling water you use.
And to think I give away this valuable advice for free! (Kidding. Sort of.) Enjoy! And as always, feel free to pass along any favorite holiday cocktails you make, too—I’m always looking to add to my collection!
Six Stock Market Thoughts
As for the market, I’ll keep it brief since we’re all in R&R mode right now. But I did want to pass along a few random thoughts, observations and pieces of advice for you to chew on over the weekend.
- First off, I don’t predict where the market will be down the road, but one thing to keep in mind (and that few people are talking about) is that the big-cap indexes have only recently come out of big periods of no net progress. Take a look at this two-year chart of the S&P 500—from late January 2018 to early October 2019 (21-plus months), the index made no net progress. There are never any guarantees, of course, but I think the action means there’s a greater potential of a solid, sustained run than many believe.
- One of the big bugaboos with the market this year has been the action in small- and mid-cap indexes—they started the year super-strong along with everything else, but they stalled out relatively early in the year and failed to make new highs afterwards, even when big-cap indexes were pushing ahead. But that now appears to be resolving on the upside, with the Russell 2000 (small caps) and S&P 400 (mid caps) both leaping to multi-month highs this week.
- As I’ve said before, I’m not a huge “breakout” player in the major indexes—key levels in major indexes are usually well known, and the obvious often fails in the stock market—but with the market strong, there’s nothing wrong with trying to piece into some leverage long index funds to get a foothold in the bull move. At this point, though, maybe you start small and/or try to buy on dips.
- I’m getting a fair amount of questions about some former big winners that have been lagging for a while but, just recently, have popped their heads up. Check out Square (SQ), which has bobbed up and down in a wide range all year before picking up a little steam of late. Could it keep rallying? Absolutely, it’s a bull market after all. So I’m negative on the stock—but it’s clearly also not a leader, at least right now, and there’s plenty of overhead to chew through. Bottom line, if you want to trade some of these off-the-bottom names, that’s fine, but the big(ger) money will probably be in fresh leaders that emerged to new highs shortly after the market bottom.
- One of my favorite buying patterns is what I simply call “Early-Stage Pullbacks (or Pullback Resumptions),” which takes place a few weeks after a stock stages a big, decisive breakout and run-up—the first pullback or consolidation of a week or two or three is usually a great buying opportunity. And right now there are a ton of stocks that have kited higher for a few weeks, and the first pullback is likely buyable. There are tons of examples, but here are two: On the cyclical/housing side of things, strong Leggett & Platt (LEG) is finally taking a breather after a huge run to multi-year highs; and on the growth side of things, we’ve seen a powerful, persistent advance in big-cap Vertex Pharmaceuticals (VRTX)—two or three weeks of calm action or some shakeouts will likely bring in fresh buyers.
- On the flip side, I’m still OK playing some breakouts, but just realize that the farther we get away from the market’s kickoff point (early/mid-October), the greater the chance the stock isn’t a “real” leader. That just is my way of saying to be more discerning (look for huge power on any breakout) or, as I would prefer, look for stocks that have already gotten going and look to play that first pullback.