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Don't Fear the Fed: Stocks, Gold Still a Buy, Bernie Schaeffer Says

Posted Dec 04, 2009 04:18pm EST by Aaron Task in Investing, Commodities
Related: ^DJI, ^GSPC, ^RUT, XRT, GLD, RTH, SBUX

Stocks soared Friday morning following the release of a much stronger-than-expected November jobs report, with the Dow trading as high as 10,516 intraday. But the rally soon reversed and major averages closed well off their highs of the day after spending some time in negative territory midafternoon.

The Dow Jones industrial average, up more than 150 points at its intraday high, ended up 22.75 points to 10,388.90. The Nasdaq Composite Index rose 21.21 points to 2,194.35.

The jobs data spurred strength in the dollar and accompanying fears of a Fed rate hike sooner vs. later, which many cited for the stock market's decline, as well as a huge swoon in gold, which tumbled more than $60, or 5%, to $1156.60 per ounce.

Bernie Schaeffer, chairman of Schaeffer's Investment Research, says it's way premature to start worrying about a Fed rate hike and sees "no fundamental reason" for the dollar to keep rallying. As a result, he believes the rallies in both equities and gold will resume in the not-too-distant future, while noting there's important short-term technical resistance at 1200 on the S&P and 600 on the Russell 2000.

"I would be a buyer," Schaeffer says, expressing particular favor for retail stocks. He recommends the SPDR S&P Retail (XRT), and well as J. Crew, Polo Ralph Lauren, Netflix, Office Depot, and Starbucks.

As with the market in general, Schaeffer says there's too much negative sentiment (and related bets) on those retail names, despite their strong price performance since the March lows. For a technician with a contrarian bent, that's a particularly bullish combination, he says.

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