Saturday, 26 April 2014

April 26, 2014 – Weekend Market Comment

April 26, 2014 – The Nasdaq lost -1.75% on Friday to lead the market lower as investors continue to rotate out of equities and move to a risk off stance. The Nasdaq is full of high beta stocks and leads on the way up and on the way down.  As I said in the April 13 comment this is a time to get ready for "sell in May and go away" and this is not a good time to put new capital to work. The only sectors that are up recently are energy and utilities. Meanwhile consumer discretionary stocks lead the market lower. Also although technically the S & P 500 is still up for the year 2014, however the smaller cap indexes like the mid cap 400 and the Nasdaq are in fact already at negative return for the year. In short when large cap is leading and defensive stocks like utilities are leading it is a sell off. Overall we are in a bull market still and there will be some bargains to be had after this sell off but there is no sense trying to catch falling knives. There will be plenty of signs when we are ready to start a summer rally. Until then your best position is in fixed income and in cash.

Until the Long Term Bull Bear Lines head down you must keep the faith that the market is climbing,

The Primary Sell graph shows that the smart money on Wall Street is not very enthusiastic.

On the big board things are holding up better with some 55% of stocks above there 50 day moving average, but again it looks like that could turn sour quickly.

The CCI has turned up on the VIX and it looks like the pros are buying protection.

The green arrow graph so some hope that this sell off is reaching a peak but it is not there yet.

Finally there is this graph. I introduced this here a while ago but it does not have an official name yet. The red line is bonds (doing very well)  and the mufti-color line is how well consumer discretionary is doing vs the S & P 500 well the answer is . . . not so good. In other words another indicator that says caution.

How to Play This
Well another sign of a toppy market was the 7 old guys I saw in McDonald's bragging about the stock they bought this week. No I don't eat at McDonald's but I am just back to my summer home in Canada and I needed coffee and wi-fi.  So understand the last money into a bull market are the least experienced. If you are an energy trader you may have some good times ahead (or not) -- for the rest of us time to harvest profits.

Energy stocks have been doing well here is one of my favorites New Vista Energy. I am not saying run out and buy this -- in fact you are chasing to get in now. But is has done very well.

One equity to keep in your sights is TripAdvisor (TRIP). Right now this stock is at 30% off the all time high as it goes "on sale" when the turn comes I hope to back the truck up on this one. You can learn more here about how Tripadvisor makes money and better  consider this they own this market they are well on the way to controlling the travel industry. .

Sunday, 13 April 2014

April 13, 2014 – Weekend Market Comment

April 13, 2014 – The wrenching sell-off in U.S. high-growth technology and biotech shares could leave investors braced for more than a minor pullback when earnings pick up speed this week. First-quarter earnings estimates have fallen sharply as many companies have blamed the brutal winter for weak outlooks. With high-valuation stocks under pressure, earnings could be subjected to even more investor scrutiny than usual.

Of course if your read my last Market Comment all of this was no surprise, in that posting talked about the rotation by large cap funds from high risk equities toward bands and low beta equities. In other words out with the stocks like bio-tech and in to consumer staples and utilities. All in preparation for a big "Sell in May and go away cycle". Also being where we are in the Presidential cycle it is very likely 2014 will not be as good as 2013.

So the best performer this week was the DOW, followed be the S & P 500 then the Russell2000 and wost performing was the NASDAQ. as you can see the riskier the market the worst this sell off has been. A move into blue chips is one trend emerging after the market's slide, which pushed the Nasdaq down on Friday to close below 4,000 for the first time since February 3. The Nasdaq Composite Index has fallen 4.7 percent for April so far. That means the Nasdaq still has a way to go before slipping into correction mode, which Wall Street defines as a drop of 10 percent from a recent peak. At Friday's close, the Dow Jones industrial average was down 2.6 percent for April so far and the S&P 500 was down 3 percent.
As you can see below the S&P 500 is in a sharp decline. I expect the market to hit the 200 day moving average (see red line at 67.70) :

 The Primary Sell indicator is continuing down. That tells you the smart money is exiting the market.

The VIX shows a spike in fear in the market this week.

How to Play This
Cash would be the best place to be until  we are through this rough spot. Harvest your winners, dump your looser and keep your powder dry until there is another buying opportunity.