Saturday, 22 March 2014

March 22, 2014 – Weekend Market Comment

March 22, 2014 -  The S&P 500 hit a historic intraday high right after the open. And all 10 sectors in the S&P 500 are up this week. Financials have had great run, with the KBW Bank Index (BKX) up 4.7 percent, and Technology is up over 2 percent. Even interest-rate sensitive sector...are up on the week. Even more remarkable is that the markets side stepped a potential land mine in long as there is no troop movements, the markets have shown little interest, so far.

The Dallas Fed's Richard Fisher was also speaking midday, noting he had no qualms about seeing a little more market volatility.

Stocks were weaker going into the final two hours of trading...there was a sell-side imbalance in stock for sale at the close. There is also a quarterly rebalancing of the S&P 500 at the close, with some modest stock for sale with IBM (IBM), Cisco (CSCO), Express Scripts (ESRX), Illinois Tool Works (ITW), and Apple (AAPL), all of which are having their weightings reduced in the S&P 500 due to buybacks.

Bottom line: The most hated rally continues. The S&P 500 is up 1.3 percent for the week to date. However, many high beta stocks like Netflicks and some biotech stocks sold off hard and were replaced with buying in more stable consumer staples, utilities and old school tech stocks. In other words the smart money is still in the market but is turning decidedly cautious.

If you look at the S & P 500 you can see it is lagging lately and the TSI (True strength Indicator) at the top of the chart shows the lack luster interest.

The story looks better for the 50 day overbought, but notice the slope line is showing a shortage of momentum, could easily go the way of August.

High flying tech stocks are being abandoned as shows in the Nasdaq Summation Index.

Still lots of strength on the big board as the NYSE new High Low chart shows the bull continues

The VIX failed to complete its cycle lower showing there is fear returning in professional trading desks

Late in trading there was a general selling and it is reflected in a sudden drop in On Balance Volume- now a one day OBV drop is no reason to run scared but your antennas should be up.

Of course this is all reflected in the Aggressive defensive graph which is decidedly going in the direction of defensive. Notice the green slope line in a fall.

How to Play This
Well first off we are just 5 weeks until May when "Sell In May and Go Away" takes over. This year being where it is in the U.S. Presidential cycle and after such a run this could be a really good sell off. You must play the market the way it wants, be long pick only stocks that are strong. This is a great time to buy the DVY ETF and consumer stocks like P&G. This is not a time to bet on a high tech wiz bang high Beta stocks.

Saturday, 8 March 2014

March 8, 2014 – Weekend Market Comment

March 8, 2014 – U.S. stocks staged a mixed finish Friday, with the S&P 500 ending at another record, as investors tracked the standoff in Ukraine and after February's jobs report indicated the harsh winter could be the culprit behind recent weakness in economic data.

Up for a fifth consecutive week, the Nasdaq fell 15.9 points, or 0.4 percent, to 4,336.22, up 0.7 percent from the week-ago close.

I am concerned that this rally is getting long in tooth and stocks are overdue for a corrective period. First, let's consider the reasoning behind today's rally. Stocks were down on Monday because the markets were spooked by the situation in Ukraine. The first trading day of the month normally has a huge bullish bias, because fund managers typically put new month to work at the beginning of each month. Buyers held back on Monday because of the situation in Ukraine and this created pent-up demand, which was subsequently released on Tuesday.

Overall all indicators are positive, clearly the market is overbought, but that is a positive thing until it breaks down and you can never tell when that is. 

The NYSE Hi Lo Graph is looking very positive:

The Primary Sell model is looking strong:

The VIX or fear gauge is on a steady slow towards optimism:

The Green Arrow graph continues to climb:

TLT is continuing to sell off, indicating that hedge funds are rotating out of bonds and into equities.

If you want to worry about anything, look at NetSuite this week, this stock is held by a lot of funds and it tends to sell off as the rest of the market is peaking. 
I used a stop to get me out with a nice profit.

How to Play This.
Well you can ride it further, but this might also be a wise time to raise your stops and sell your biggest winners. You can always play something more conservative when overbought, for example DVY in place of some of the more volatile stocks.