Sunday, 27 July 2014

July 26, 2014 – Weekend Market Comment

July 26, 2014 – The Dow closed below 17,000 in its biggest weekly decline in 7 weeks after Visa fell more than 4 percent on its lowered full-year revenue forecast. U.S. stocks finished lower on Friday weighed by Amazon's weak earnings and Visa's disappointing outlook, in addition to ongoing worries over geopolitical unrest. In the final hour of trading, markets briefly ticked lower after Goldman Sachs released a note saying they are "neutral" on equities over three months as it sees a slide in bonds leading to a temporary sell-off in stocks.

OK so lets see how bad the damage is, first off, as I have said for a while, we are in a very strong bull market. That has been true for a long time, and lets face it, the bull has run more than five years and no bull market goes ten years with out a correction, so the best days for making money were the prior five, and risk will be higher in the next few years.

If you look at the long-term bull and bear lines we are still seeing strength and so we must hope the end is not now. Click here to learn about the bull bear lines..

One of my friends was asking about the pull back in Tripadvisor this week. He wanted me to pick a price that would be a good point to get in after it drops. Well that is a bit like catching falling knives.

So all together.... we don't catch falling knives

You guys know how this works, when the charts tell you to get  in, you do, but not until then. I am no clairvoyant . . . it could go to zero (I don't think so but who knows).  So all I can say is "we are not there yet" (see doggy graphic above). Looks like Mr. Market is putting another fine company on sale for us to buy at a a bargain price.  OK Now lets see that TripAdvisor chart . . . mmm really ugly. 

He also asked why TripAdvisor sold off. Reason? well, there was this news . . .

TripAdvisor got tripped up by big marketing costs, posting Q2 EPS late Wednesday that fell far short of Wall Street expectations, sending the stock falling.The company's revenue beat expectations, but TripAdvisor (NASDAQ:TRIP) stock was down 11.5% in after-hours trading on the earnings miss.

Lets think about that, sales up and profits down. Now in a car company that is a scary thing, it means that they are not efficient or the market is too competitive. Tripadvisor is not a car company, it is a web site. Its biggest cost is wages but it could if necessary run with about 5 staff, but when it increases costs it is adding value either by acquiring new features (click example) or by doing more R & D. The point is it can turn up the profit anytime it wants by downsizing staff. What really matter is sales are increasing.  Also it just could be growing too fast to bring a lot of profit to the bottom line now, that could come later. People are mad at Apple who hoards cash and is not using it to grow the firm and now they are doing the opposite whining with TripAdvisor.... you can't win.  So this silly sell off is probably just the pros scarring off the amateurs. But don't speculate... the charts will rebound if this sell-off is just a knee jerk reaction.

But that is not the whole story, Tripadvisor is a high beta stock, that means it goes both UP and DOWN in big leaps.  In high fling tech stocks, the usual rules of fear and greed are on steroids Now if you were listening last week I said THIS IS NO TIME TO PUT NEW MONEY TO WORK. So if the market is weak the volatile stocks will be...  volatile (big surprise!).

Last week we looked at the Primary Sell indicator and here is this weeks version. NEWSFLASH: this is not a positive looking graph, folks. (how to use this graph click here)

We also looked at the percentage of stocks over the 50 day moving average. (Learn to use this graph here). OK now folks this does not look happy does it . . .

What I find troubling is that small cap stocks are way behind big cap and that is never good for the market and can even foreshadow a correction. Here I am charting the Mid cap 400 verse the S&P 500 large cap stocks. If the graph goes up then smaller stocks are selling well, if the graph is down it signals an interest in safety. The lower graph shows the S&P500 prices. Notice the top graph predicts the bottom graph price.

The industrial stocks haven't looked too industrious this year. With a mere 1 percent rise in 2014, the sector is lagging the S&P 500 by more than 5 percentage points. This is important because this is the heart of the power of the US economy. So, we're not exactly in a uniformly strong market. The Russell 2000, which represents 2,000 companies, is down 2 percent for the year. And big deal, the S&P is up 6 percent, whereas the Philippines, Indonesia, India, Thailand, Vietnam are all up between 15 percent and 25 percent.

What Works Now
What is doing well lately is China and emerging markets. Here is China's answer to Google, BIDU.

Brazil is strong -- so you are glad you followed me in to Companhia Energetica de Minas Gerais-Cemig ADS  symbol CIG 

Even the broad Canadian Markets are doing well, this chart is the ration of the TSE 60 vs the S&P500 a raising graph shows you are better off invested in Canadian markets. 

So yeah like buy Canadian eh?

Monday, 21 July 2014

July 19, 2014 – Weekend Market Comment

July 19, 2014 – A strong rebound on Friday helped U.S. large cap stock indexes end the week higher. The Bull Bear lines are still intact and so we are still in a bull market. The week's strongest gainers were the Dow Industrials (+0.92%). The Dow also remains above its January high near 16,600. Friday's up volume was slightly less that Thursday's down volume. But the week's volume flow was generally positive. The same is true for the Nasdaq and S&P 500. The Nasdaq gained +0.38% on the week. A long hoped for improvement in the economy appears to be manifesting itself in second-quarter U.S. earnings, but the next two weeks could be the real test. Companies such as General Electric and Intel have reported solid results. In addition, GE believes now is a ripe moment to spin off its private label credit card division in the hopes growing consumer demand will make it more attractive.

In addition, 68 percent of S&P 500 companies so far are beating analysts' profit expectations, above the 63 percent long-term average, according to Thomson Reuters data. A similarly high percentage of companies are beating revenue forecasts.

Still, it's easy to overestimate the excitement. Many of the early reporting is by financial companies, not always the best barometer of Main Street activity. The next two weeks, however, will see 60 percent of the S&P 500 release their results. That is key for investor looking for confirmation the anticipated economic rebound from the first quarter is more than just weather related.

That said this is not yet the time to put new money to work and I would remain conservative.

The NASDAQ summation index still shows weakness .

The VIX is weak . . . could easily turn up from here

The Primary Sell indicators tells you the pros on wall street are not buying yet either. (click here to learn how to use this graph)

Look at Market leaders like Under Armour and Tripadvisor.... weak

So I would remain on the sidelines yet, despite a strong rally on Friday....

Read My Disclaimer Here

Saturday, 12 July 2014

July 12, 2014 – Weekend Market Comment

July 12, 2014 – The Dow in the past week declined 0.7 percent to 16,943, and the S&P 500 was off 0.9 percent at 1,967. The Nasdaq fell 1.6 percent, to 4,415. The worst performer, however, was the Russell 2000, off about 4 percent, to 1,159, in its worst weekly decline in two years.

Stocks were higher on the Fed release Wednesday but retreated Thursday on global growth concerns and worries about a Portuguese banks. But that overreaction was no doubt the result of a market that has become too complacent

The VIX, meanwhile, rose 22 percent in the past week to 12.59, still a relatively low level, but a sign that more market participants are hedging. The VIX is the CBOE's Volatility Index, a measure of market expectations of near term volatility based on stock index options prices. Here is the VIX buy sell Chart. 

Speaking of the VIX. If you followed me in to VXX and did not loose your nerve, you were rewarded this week. 

As we have been seeing the not only is the Primary Sell graph often the most reliable predictor it is often flashing concern way before the other indicators.  notice its steady decay heading for the zero line. To learn about this graph click CM4PIF School Lesson 2: Primary Sell

Perhaps more ominous is the NASDAQ summation index is not looking well either, with the first pull back in weeks.

Our Percent above 50 indicator also continues to degrade. Click her to learn about CME4PIF School Lesson 4: Overbought -- Index Percent Above 50-Day Moving Average.  

This is simple correction and not a full fledged panic, the bull bear lines are still strong and the On Balance Volume has not fallen off. So long as the red keeps up with the black things should be orderly. 

One of the weakest areas of the U.S. economy has been new home construction. Darling of the industry TREX is looking pathetic as less people are building plastic sun decks right now. This just goes to show ... don't fall in love with a stock. 

Ditto for real wood, as Canadian lumber company Canfor hits the skids. 

As I said before my stops are pulled in nice and tight under Under Armour as it appears to have got a hole in it earnings and it looks like a perfect double top is forming. 

What Works Now
Well of course we have pulled our horns in getting ready to buy in on the next turn. That means I am more in cash than usual and most of my pipeline stocks have had a small correction, except TransCanada still on the way up.

You could look at US Bonds probably all right for a little while, I have bit of this for safety in rough times. .

Also I still hold my uber safe Canadain Bank, the Bank of Nova Scotia, although I am expecting a small pull back there too and the stops are tight.

I sold this but the U.S equal to BNS is probably Bank of New York. Again probably headed for a pull back with the market.

In Other News
Well Since we have had a nice run this spring in the market and your wallets are now fat with cash consider buying one of these. The wait is finally over, ladies and gentlemen! Dodge has unleashed its most powerful Challenger ever — the Hellcat. Rumored since early last year and initially expected to show up at the 2014 Detroit Auto Show, the monstrous muscle car was raised from the dark pits of Hell with a huge, supercharged, 6.2-liter, V-8 mill under the hood. Chrysler officially confirmed that the new Challenger SRT Hellcat will deliver a whopping 707 horsepower. This make the Challenger Hellcat the most powerful muscle car ever. 

Read My Disclaimer Here

Saturday, 5 July 2014

July 5, 2014 – Weekend Market Comment

July 5, 2014 – This week the Dow broke through 17,000 for the first time, helped by strong US jobs figures and reassurance that the Federal Reserve will not raise rates to pop asset price bubbles.

Many fresh economic indicators reported last week and they were very positive. Positive numbers a good for a long-term up trend in the stock market. The S&P 500 hit new highs in late February, early March, early April, late May, June and early July. In other words, the S&P 500 has pretty much been marching forward the entire year. ISM Manufacturing and ISM Services were both above 55. Anything above 50 is supports economic growth and readings above 55 are quite strong. Second, auto sales hit 16.98 million units (annualized), which was the highest reading since July 2006. Also the employment numbers were strong. The unemployment rate, at 6.1 percent, is the lowest since September 2008. A year ago, it was a whopping 7.5 percent. This fits in perfectly with the gradually expanding economy that has been the backbone of the stock market rally. The ADP private payrolls data on Wednesday saw the biggest jump since November 2012. On a related note, pending home sales are up 6.1 percent. Even though the stock market may seem overbought and ripe for a correction, these economic indicators clearly support a long-term uptrend in stocks.

Of course the Long Term Bull and Bear are still very bullish. Learn how this works click here.
(as always click any graphic to enlarge it) 

The NASDAQ market is full of tech and small cap stocks and they are doing very well as shown by the summation index.

The VIX is hitting new lows, I got cute and bought some VXX as a counter trend move, dumped that in a hurry. See I make lots of mistakes too. 

The Primary Sell is Backing off from giddy heights, indicating a little common sense is returning to the market slowly. Learn how this works by clicking here.

The percent above 50-day overbought indicators are still looking toppy. Learn to how that works click here.

What Works Now
As I mentioned consumer and Tech are doing very well the green line pulling ahead is consumer discretionary. 

Just look at a stock that is a bit of both Apple

Still loving Tripadvisor my top aggressive stock pick up 27.5% in 3 months. Yowsers.

Yes happy to be in Canadian Bank -- Bank of Nova Scotia and it has a dividend too.

CIG Energetica de Minas Gerais the Brazilian power company is hard to say but great time this week, it had a nice bounce to end the week and sports a 7% + dividend. 

Read My Disclaimer Here