Tags: Peroni | stock | market | Hulbert

Advisors Asset Mgmt's Peroni: 'Technical Sizzle Underlying this Bull Market'

Thursday, 30 May 2013 07:59 AM

By John Morgan

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Market strategist Eugene Peroni believes the stock market's upside from here — both short term and long term — is going to be one for the record books.

Investors should avoid thinking stocks are overbought just because of the heady gains they have already enjoyed, Peroni, senior vice president and portfolio manager at Advisors Asset Management, wrote in an article for Investment News. Instead, he said, various technical indicators show the market has miles to go before it rests.

"The 2002 market bottom packed powerful technical credentials that I believe could make the market's ultimate upside potential in this cycle legendary," Peroni declared.

Editor's Note:
Billionaires Dump Stocks. Prepare for the Unthinkable.

His latest target for the Dow Jones Industrial Average: 18,000. "There is technical sizzle underlying this bull market and I continue to expect higher levels before a major decline of 10 percent of greater unfolds," he predicted.

Peroni listed four factors why the sky is the limit for stocks:

• Stocks have been consolidating by sector, and the rotational pullbacks, one area at a time in the core industry categories, has largely gone unnoticed, as the broad market has marched forward.

• Diverse sector leadership has prevailed against a backdrop in which frothy speculation has been largely absent.

"The broad sector leadership in this cycle is one of the most stunning internal factors of this advance I have observed and has contributed significantly to the market's foundation," Peroni wrote.

• The Federal Reserve's transparent policy on rates has given financial markets confidence that any monetary tightening will be telegraphed ahead of time.

• The average investor is still cautious about stocks, which Peroni views as a bullish indicator that shows the market still has potential upside.

In fact, consumer confidence is increasing. The Conference Board's U.S. consumer confidence index rose in May to a five-year high.

"I expect today's tepid interest in stocks among sidelined investors to be transformed into excitement and urgency as major corrections remain elusive and economic data improves," Peroni exclaimed.

However, MarketWatch's Mark Hulbert said it might be counterintuitive, but that a big pickup in consumer confidence can be viewed as a bad market omen.

"If you aren't frightened by the latest consumer confidence data, you're not paying attention," Hulbert wrote.

Hulbert said his historical analysis of the last three decades showed the biggest monthly jumps in the consumer confidence index were, on average, followed by sub-standard returns.

"Conversely, big drops in the index were typically followed by above-average returns," he explained.

Editor's Note: Billionaires Dump Stocks. Prepare for the Unthinkable.

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