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Stocks Move Slowly but Surely Higher

After months of tit-for-tat tantrums between the U.S. and China, the market continues to hope that a couple potential meetings between these economic leaders might eventually bear fruit. Therefore, stocks continued to move higher on a slow Monday session.

To recap, these two trade adversaries are reportedly attempting to put together a meeting between President Trump and Chinese President Xi Jinping in November. Just a day earlier came news that “lower-level” meetings could take place later this week. The Dow really ran with these reports and jumped 1.4% last week.

The index increased 0.35% on Monday (or nearly 90 points) to 25,758.7 for its third day in the green. The S&P is back to within 1% of making a new all-time high following today’s ascent of 0.24% to 2857.1. The NASDAQ had the roughest session but still closed higher by 0.06% to 7821.

Besides trade or any other surprises, the big news this week comes from Jackson Hole, Wyoming. It’s time for the annual Economic Policy Symposium for the world’s central bankers, which culminates on Friday with a speech from Fed Chair Jerome Powell. It’s not expected to be that much of a market mover…but President Trump may have something to say about that!

In an interview with Reuters, POTUS said he was “not thrilled” with Mr. Powell and the Fed raising rates. This is pretty much exactly what he said in a CNBC interview a month ago. The media loves this kind of stuff, though most folks don’t think the Fed Chair will be intimidated. The news may have impacted stocks in the final hour, but they were still able to finish higher.

“The thought of Trump meddling with the Fed is viewed as a negative as it will create more controversy surrounding Trump. Does that really matter? Not really, so while this might get news, I doubt more comments from Trump on the issue will hurt the market,” said Jeremy in Counterstrike.

So we’re all set up for another interesting week…let’s hope it's also another positive one.

Today's Portfolio Highlights:

Counterstrike: If you don’t already own a thick coat from Canada Goose Holdings (GOOS), then you’ve certainly seen them and their distinctive NASA-looking patches about town in the winter. It’s one of the hottest items during the coldest months of the year, which helped shares soar to $68 from $15 since their IPO back in March 2017. However, shares came under pressure recently when its most recent surprise was “only” 33% instead of nearly 200% previously. Jeremy wants to “nibble” here with a 5% allocation in GOOS because there is a lot of support in the next 10 points lower. The plan is to add more once support is established.

In other news, the editor also decided to add 5% more to its Weight Watchers (WTW) position from last week. The stock soared 100% from January through June and, like GOOS, was punished after its positive earnings surprise was “only” in the double digits. Shares have continued lower since it was added, but Jeremy expects a bounceback once its 200-day is tested…and its being tested right now! Read the complete commentary for more on today’s moves.

Surprise Trader: With a Zacks Industry Rank in the top 21%, Dave believes that retailers should continue to post positive results in the final days of this earnings season. In fact, the editor is so confident that he added a company today that was once on his “naughty list”. Buckle (BKE), a retailer of casual apparel for young men and women, is quite the turnaround story with five straight quarters of earnings beats and an EPS trend that has turned “decidedly positive”. BKE reports before the bell on Friday and was added to the portfolio today with a 12.5% allocation. Read more in the complete commentary.

Options Trader: Shares of Amphenol (APH) jumped after reporting positive surprises for earnings and sales of 5.88% and 5.34%, respectively. And Kevin expects even more gains for this interconnect products manufacturer given its fundamentals and bullish chart pattern. Therefore, he bought to open 3 October 95.00 Calls in APH. His first price target is $100.

Meanwhile, Kevin is very bullish on retail and he loves to find great-looking stocks with low P/S ratios of equal to or less than 1. He found a company that checks both of these boxes in membership warehouse giant Costco (COST), which is expected to grow earnings and sales moving forward. The editor added a couple bull call spreads by buying to open 2 January 230.00 Calls AND selling to open 2 January 240.00 Calls. If COST gets to $240 by mid-January, the position would gain 141%. Read the full write-up for more on these moves.

Technology Innovators: Shares of The Trade Desk (TDD) soared to new all-time highs after a “monster” beat and raise quarter earlier this month, which included a positive earnings surprise of 36% and year-over-year revenue growth of 54%. Since the report on August 9, the stock has held onto that gain. Brian Bolan thinks this provider of a technology platform for advertising is just getting started on a much larger move higher. Therefore, he added this Zacks Rank #2 (Buy) on Monday. Read the full write-up for a lot more info on this new buy.

Black Box Trader: The portfolio swapped out four names in this week’s adjustment. On Monday, these stocks left the portfolio:

• DR Horton (DHI)
• LifePoint Health (LPNT)
• Rent-A-Center (RCII)
• Kemet Corp (KEM)

The new buys that replaced these names are:

• Abercrombie & Fitch (ANF)
• Williams-Sonoma (WSM)
• Jacobs Engineering (JEC)
• Conduent, Inc (CNDT)

Read the Black Box Trader's Guide to learn more about this computer-driven service designed to take the emotion out of investing.

Zacks Confidential: The only question the market has right now is: Who's going to win this trade war? And not only with China, but with Europe, Mexico and Canada as well. This week's Zacks Confidential is cutting right to the chase as Kevin has asked David Borun to explain the ins and outs of these trade conflicts. Learn about the strengths and weaknesses of each matchup and get a couple recommendations by clicking: Does the U.S. Have Enough Leverage to Win a Trade War?

All the Best,
Jim Giaquinto

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