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Are My Eyes Deceiving Me?

Let me see if I got this right. On Tuesday the economic data looked great. Durable Goods, Case-Shiller HPI, Richmond Fed Mfg and Consumer Confidence were ALL better than expected. This likely increases the odds of QE removal. And yet stocks ACTUALLY went up???

Yes, I am being sarcastic because this is the way things should be. Meaning:

Positive economic data = higher GDP = higher corporate earnings = higher shares prices

Yet, of late the equation has been perverted by those afraid of QE tapering. I am not one of them.

The logical next question is: How will investors react to positive economic data going forward?

I would like to think that investors will react as they did on Tuesday with a nearly 1% rise in S&P 500. However, I sense that with stocks still under the 50 day moving average and not so great headlines coming out of China, that the bears will be in control a while longer.

That is why I am only 60% long right now as opposed to the 100%+ long the majority of 2013 up to this point. I recommend you consider similar defensive measures until we get closer to 1500 which will present better buying opportunities.

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Steve Reitmeister (aka Reity...pronounced "Righty")

Executive Vice President

Zacks Investment Research

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