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Fed Statement Keeps Rally Alive

Stocks rose for a third straight session on Wednesday as the Fed statement was considered dovish enough to keep the major indices marching toward new highs.

As expected, the Committee kept rates unchanged. Its official stance moving forward is that a rate cut in 2019 is unlikely.

However, these things are all about language and reading in between the lines. Investors think the Fed left itself with more than enough leeway to cut rates much sooner than 2020… perhaps even in July! In fact, eight members of the committee expect a cut in 2019.

After a sluggish morning, stocks didn’t exactly soar once the news was released. Maybe it wasn’t adequately dovish, or perhaps it was so expected that its effectiveness was limited. Either way, it was rather anticlimactic after the buildup over the past few days.

Nevertheless, stocks did advance and kept the rally moving.

The S&P, which crossed above 2900 yesterday and is within 1% of its all-time high, added another 0.30% on Wednesday to end at 2926.46. The Dow increased 0.15% (or about 38 points) to 26,504.

The NASDAQ was again the percentage leader with an increase of 0.42% to 7987.32.

The major indices are going for a third straight week in the green to continue adding onto June’s gains following a rough May.

Now the next big focus will be the G20 next week in Japan. We found out just yesterday that President Trump and China President Xi would be getting together to try and make some headway in the trade conflict.

It would be unwise to expect an agreement during the summit, but it's not too much to ask that there’s some groundwork for further negotiations.

If progress can be made on trade, then the major indices could be at all-time highs by the next Fed meeting in July… when the market is fully expecting a rate cut…

Today's Portfolio Highlights:

Marijuana Innovators: The number of children diagnosed with an Autism Spectrum Disorder has soared in the past 20 years to 1 in 59 kids. That’s way up from 1 in 150 in 2000. There’s a tiny and very speculative pharmaceutical company that may have a drug that can bring some relief to these children and their beleaguered parents. Zynerba Pharmaceuticals (ZYNE) has been granted a US patent for therapeutic treatment of ASD with cannabidiol-based medication. While its tough to estimate how much money such an unpredictable treatment can make for investors, there is tremendous upside potential for this 19-year patent to treat a growing problem. Dave is willing to take the risk and added ZYNE on Wednesday. Read the full write-up for more.

Insider Trader: The big news this year for Occidental (OXY) was its acquisition of Anadarko Petroleum, which sent shares of this E&P big cap tumbling to new 52-week lows. Shares are down approximately 17% year to date. But a recent cluster buy shows that several insiders believe the selling is absurd and overdone. Last week, the CEO, the CFO, a Senior VP, the General Counsel, a Senior VP for Business Support and a couple directors all bought shares of their own company. Such a heavy amount of buying certainly caught the attention of Tracey, especially coming from a large-cap stock. The editor decided to add OXY to the portfolio on Wednesday with a 5.6% allocation, which was all the money this now fully-invested portfolio had on the sidelines. Read the complete commentary for a lot more on this new buy.

Home Run Investor: The portfolio is finally as close as possible to being full after today’s addition of Napco Security Technologies (NSSC). This Zacks Rank #2 (Buy) focuses on security alarm products and door security devices for commercial and residential installations. Brian was most impressed with the company’s chart, which shows that the stock started running in February and, impressively, was one of the few to gain in the otherwise horrible month of May. Read the complete commentary for more this new addition.

Have a Great Evening,
Jim Giaquinto

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