Bull Market to Continue on Near-Term Price Strength

Bull Market to Continue on Near-Term Price StrengthThere is plenty of price strength in this bull market. It’s still coming from transportation stocks and dividend-paying blue chips.

There’s also been continued price strength among home improvement retailers. Lowes Companies, Inc. (LOW) recently soared on the stock market after beating Wall Street consensus with its latest earnings report. The stock has been on a tear over the last couple of years, just like The Home Depot, Inc. (HD).

In the absence of a material shock, stocks should finish out the year with another solid gain. And this is on top of a tremendous year in 2013.

The fundamentals for equity investors going into 2015 remain positive, as corporate balance sheets are in excellent health, the cost of capital is extremely low, and corporate outlooks are positive.

With this in mind, there are a number of companies in the marketplace that are good benchmarks—they’re stocks worth following in order to help you form your own market view.

Benchmark Stocks to Watch

The Home Depot certainly falls into this category. Other benchmarks include Union Pacific Corporation (UNP), FedEx Corporation (FDX), Microsoft Corporation (MSFT), 3M Company (MMM), Oracle Corporation (ORCL), Johnson and Johnson (JNJ), The Walt Disney Company (DIS), Visa Inc. (V), and The Travelers Companies, Inc. (TRV).

Many of these businesses are Dow components, and they are mature brands. But following these stocks offers worthwhile insight into the direction of the broader stock market. A lot of these stocks are the market’s existing winners and they should finish off the year strongly, with good prospects for 2015.

The Dow Jones Transportation Average is always an important index worth following. Where transportation stocks go, so often does the broader market. In any case, it’s highly unlikely to have stocks breaking down in price without transportation issues doing so commensurately.

The Dow Jones Transportation Average recovered strongly from its sell-off in early October. The probability of its continuing price strength has improved, as lower oil prices should provide an added boost to fourth-quarter earnings.

Adding to the recent boost in investor sentiment is merger activity, which is a signal that corporations feel more confident about loosening up their cash hoards and using their shares as currency. This is another confirming indicator.

Key Stock Indices Showing Strength

The Dow Jones Industrial Average and the Dow Jones Transportation Average just hit fresh new highs. (See: Railroad Stocks the Best Market Predictor for Investors?)

At the speculative end of the market, the NASDAQ Biotechnology Index, which has been moving up consistently since the beginning of 2012, just hit another new record-high.

Small-cap stocks have been under performing, as evidenced by the flat Russell 2000 index this year. But capital gains in this index were tremendous in 2013.

Current price strength in transportation stocks and dividend-paying blue chips is this market’s primary trend and a positive catalyst overall.

Another quick sell-off like the one experienced in October could happen at any time, but material price retrenchments are very much a regular occurrence in bull markets.

The Takeaway Point for Investors…

While value is not something that’s so prevalent at this time, the fundamentals exist for another solid earnings season for the fourth quarter. The secular bull market remains intact.