Analyst: Market may have a jerky second half
Biff Robillard, co-founder of Bannerstone Capital Management, an investment adviser in Deephaven, likens the market's tepid first half to a bowl of oatmeal and projects a bumpier second half.
Robillard started his firm Mother's Day weekend in 2008 and weathered the subsequent market downturn that bottomed in March 2009 but has rewarded investors since.
"The hallmark of the first half has been a market that's stubbornly resistant to change," Robillard said. "It just doesn't discount anything good or bad.
"It just sort of goes back and forth. … It is sort of surprising that with everyone talking about really big things — central banks and currencies, and the euro, and QE and coordination and kind of complicated macro economic issues — the market just doesn't do anything."
Robillard defines himself as a market technician, but he also studies market fundamentals and behavioral economics. "There are signs of crumbling," he said. "In terms of supply and demand, there are some interesting things happening."
Some technical analyst theories indicate a rockier second half.
"The most important thing to be aware of midyear for equity investors is that Dow theory, really the oldest technical market indicator known … seems to be warning us that a stock market stumble is on its way."
Robillard explained that the Dow Jones transportation average, a sister average to the Dow industrials, is down 9 percent on the year while the industrials are up 1.2 percent.
"What is uncanny is how typically one average or the other will catch the flu first, and you'll get them moving in opposite directions," Robillard said. "It's possible for the ice to get thin under the market with the transportation index going down."
Robillard is an optimist, but knows the third quarter is historically the quarter in which U.S. equity markets have taken their lumps. He points to some market sentiment reports that show a lot of investors are neutral — neither bullish or bearish to the market. It may not take much to tip them one way or the other.
Robillard doesn't think the third quarter will be fatal, but it will be a time where trading opportunities will be present and investors caught unaware can find trouble. "If you can't take advantage, which we will try to do, of a market upset at least don't let it hurt you."
Robillard's strategy? "I'm staying bullish, staying invested but trying not to get hammered by a big drop, and I've been raising a little cash because I want to have some money in my wallet if things go on sale."
One thing's for sure, he said. The second half of the year should be more interesting.