Jason Kelly

Ah, spring. Warming weather, blooming flowers, and rising markets. We've entered the seasonally slow part of the year for the stock market. Where did that "rising markets" part come in? From the partially open door labeled "End Of Interest Rate Increases," no doubt. They haven't ended yet, but anticipation of a pause or halt is in the air.

The averages are soaring into the air, too. Just last Friday, the Dow clamored up 1.2% to 11,577. That's a wee 146 points from its highest close ever: 11,723 hit on Jan. 14, 2000. Another 1.3% gain and we're officially in record territory for the Dow. The S&P MidCap 400 and the Russell 2000 Small Cap Index are also punching at the ceiling.

I continue to expect a major correction in August/September, but for now all is sunshine and pollination.

To wit, our permanent portfolios. So far this year, Double The Dow is up 15% and Maximum Midcap is up 20%. I've written that leadership is destined to switch from smaller to larger companies before long, and that seems to be happening. In the last month, Double The Dow rose 8% while Maximum Midcap rose just 6%.

Beer is back on the menu. We've spent most of our time in the red since buying our brewer last September. In the past month, though, it gained 9%, sufficient to bump us back into the black.

Our computer security firm also fared well in the past month: up 9%. It, too, is only a modest gainer for us, so far, but is moving aggressively and is well-positioned for dominance in the computer security industry. It's a little expensive for my taste, but that appears to be a minority view and may not matter if it can keep hitting growth targets.

On the economic and interest rate front, we had a jobs report last Friday that excited investors. According to the Labor Department, non-farm payrolls rose by only 138,000 in April. That's the smallest gain since last October. Maybe Q1's outsize gains were an aberration. Unemployment is still at 4.7%. The impact for us as investors is that there may be less inflationary pressure, so the Fed might be able to stop raising rates after next week.

There was a niggling point, though. Hourly earnings rose 0.5%, more than expected. Rising earnings could lead to businesses raising prices, but the increase wasn't enough to offset the generally good news that payrolls aren't growing too quickly.

Next week is rate-raising time. The FOMC meets on Wednesday and will raise the federal funds rate by 0.25% to 5%. It will be the 16th meeting in a row over the last two years that ended in a rate increase.

What's still up in the air is what will happen in June. Will there be a pause? Will there be a halt? Will there be another increase? Nobody knows. So, on Wednesday, people will pay more attention to what is said at the meeting than to the all-but-certain increase.

Either way, I think we'll see a significant rally as the market senses the end of tightening. Shortly after that, we should get a summer crunch as oil prices rise and the rate increases put a damper on earnings.

For now, though, we're creeping higher. The price of oil fell 6.3% in two days last week. The interest rate increases are fairly well priced into the market, as is high gasoline. There seems to be no need yet to rush for the exits ahead of a summer correction.

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E-Commerce Champion

In fact, one of my long-time buy targets is finally coming into range. After watching this e-commerce leader succeed for years at too high a price, I've been monitoring it carefully since its January share price peak above $45. Now, it's around $32 and heading to $30 fast. That's where I want to buy in.

This company handles more searches than Google and maintains more financial accounts than American Express, yet it's being overly penalized for a slowdown in its hyper growth. The slowdown is natural, however, because the company has made recent acquisitions and plans short-term investments to expand into new areas.

I've used this pattern time and again to make at least 50% profits. Just in January, the company's share price was above $45. There's almost no question that we'll see it recover to at least its previous high. If we can buy in at $30, then, we'll see at least a 50% gain. It's not a complicated formula.

I've already explained this investment to Kelly Letter subscribers, and they're poised to grab this stock when the time is right. The good news for you, however, is that the price target has not been reached yet. It's close, but not there.

If you'd like to join us in getting ready to buy this winner, please sign up for a one-cent, one-month trial of The Kelly Letter. You'll have instant access to my report on the recovery of Japan, and will receive the report on this exciting e-commerce leader once your email address is confirmed.

There's nothing to lose, and it takes just a moment to sign up. Why? Because all I need is your email address and name. No credit card number. No bank information. Really. See for yourself here.

Posted by Jason Kelly at 8:08 AM Japan time
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