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Pocket Profits Now and Prepare for Another Rally

Bill Strazzullo, chief market strategist at Bell Curve Trading, told CNBC’s “Power Lunch” that investors should consider taking profits in the downbeat market and then prepare for another climb to new highs.

In the last eight weeks, he said the S&P 500 rose 11%, the Dow Jones Industrial Average climbed 12% and Nasdaq gained 10.5%.

“We want to use this short-term weakness to get back in on the long side because this rally isn’t over,” Strazullo said. “There’s another major push on the upside. That means 1575 to 1600 in the S&P, 13,700 to 13,800 in the Dow, 2650 in the Nasdaq composite and 1950 to 1975 in the Nasdaq 100. Take some profits here. There will be some short-term weakness, but that’s going to give us an opportunity to get back in somewhere around 1475 to 1450 in the S&P and then look for another major push higher.”

He said the market fundamentals haven’t crumbled.

“The factors that have pushed us higher are still very much in play: global growth, buyout activity, shrinking supply of equities, companies going private, corporate (share) buybacks,” Strazzullo said. “In the shorter term, we’ve benefited from the weaker dollar. You saw this particularly in the last round of earnings with companies like Caterpillar that got a kick from translating expensive foreign currency back into U.S. dollars.”

Joseph Zock, senior portfolio manager at Tocqueville Funds, took a more cautious view.

“We think the news of January and February will eventually resurface on the front page of the financial press – slowing of the economy, profits for the second quarter and the difficulty the Fed is going to have in fighting inflation,” Zock said. “We’re relatively cautious. We’re looking at the valuations for securities at this point.”