Wrong…

May 3, 2013 Leave a comment

My post of 4/18 called for a market that appeared to be rolling over. Here we are a little over two weeks later at new highs in the S&P, Dow, and Russell 2000. The market essentially has gone straight up since my post.

Here’s another example of how letting our stops tell us whether the market is really rolling over or not is the best strategy for letting profits run. If our stops are set just below logical support levels and they don’t get triggered then we are assured that we are just seeing ghosts in our predictions of a lower market.

I had a few stops triggered in accounts, but very few, and mainly related to poor earnings. The markets response to earnings has been really surprising in that most companies got a pass for flat or lower revenues as long as the bottom line didn’t miss.

So, things seem to remain generally buoyant for as long as our Fed continues to provide liquidity and the job market doesn’t collapse. Until then, staying invested but moving stops up to rising support levels seems to be the best strategy.

Filed under Investment Management, Markets Commentary Tagged with , ,

Go Away in May, or Was That April?

April 18, 2013 Leave a comment

All the major U.S. stock indices appear to be rolling over. Among the apparent reasons for the weakness:
China appears to be slowing, causing a steep decline in commodity prices.
US, especially tech biz, seems to be slowing.
Europe projected to remain slow.
We’ve had a big run in equities.
Market seasonality (markets historically weak in the summer months.)

Indices and individual stock charts have broken the uptrend, so more downside seems likely. Support lines vary a little by index:
S&P 500 – Sitting on the 50 day moving average. 100 day moving average is 2% lower and the 200 day moving average is 5% lower.
Dow Jones Industrials – the 50 dma is 1.4% lower. The 100 dma is 3.5% lower, and the 200 dma is 6% lower.
NASDAQ 100 – has broken the 50 and 100 dma. The 200dma is 1.5% lower.
Russell 2000 – has broken the 50 dma and is sitting on the 100 dma. The 200 dma is 3.4% lower.

So tech and small cap stocks have been the weakest sectors. Obviously, the 200 day moving average is a critical place for indices (and individual stocks) to hold.

We’re in the middle of earnings season so it’s important to pay attention to which firms do well and which firms don’t when choosing buy or sell candidates during this period of weakness. As well, we should let our stops work.

Valuations in most sectors are within historical norms so, at this point, I feel good companies should be bought during this period of weakness.

Filed under Investment Management, Markets Commentary Tagged with , ,

Correction and Apology

April 1, 2013 Leave a comment

Reviewing my two posts before today’s, I see that I called for letting our stops tell us what direction things are going, only in my post of 2/1. I also see that I did not call for tightening stops. As well, it would have been much more helpful had I added a post or two on the markets in March. I’ll do better. Thank you for reading and please don’t be afraid to post comments-positive or not. Bob

Filed under Markets Commentary

New Highs?

April 1, 2013 Leave a comment

The S&P 500 is up 4% since my last post on 2/1, where I essentially retracted the previous day’s post calling for a market pullback. Neither was a full throated directional call, more a “let’s let our stops tell us what direction things are going.” As usual, good stops work better than good guesses.

This seems like a really good time to review where we’ve been:

S&P 500-Peaked at 1553 In March of 2000, led by the bubble in tech, sold off to 769 in October 2002 along with tech, peaked again at 1576 in October 2007, fueled by the housing/leverage bubble, sold off hard to 667 in March 2008 as the bubble burst, and is now back to 1560 today on the massive re-liquification of major US banks and multi-national companies, and a slow, but persistent, economic recovery. Big companies are much bigger than they were in 2008, with dramtically higher slaes and earnings, yet many have reasonable multiples.

NASDAQ 100-Peaked at 4816 in the tech bubble of March 2000, sold off hard to 795 in October 2001, and has clawed its way back to 2799 over 11 years, still well below its bubble highs. Big tech has expanded its sales and earnings in a big way since 2008, generally selling at historically low vlauations.

Russell 2000-Small cap stocks peaked in March 1999 at 614 and started down a full year before the rest of the indices, bottomed in October of 2001 at 325, and peaked in June of 2007 at 820 and started to sell off, again, several months before the other stock indices, but few heeded the warning. The index bottomed at 343 in March of 2009 along with the other indices, and recently hit its all-time high at 954. With stocks in this index trading at an average 16 times earnings this index does not seem pricey either.

Filed under Economy, Investment Management, Markets Commentary Tagged with , , ,

Up and Away (At Least for Today)

February 1, 2013 Leave a comment

I guess the big boys and girls weren’t quite ready to stop playing, making my prediction of an impending sell-off look a little…wrong. Two indices are above their highs of a few days ago and the other two are trying. Breadth is good and volume is OK. So, even though there are lots of extended stock charts around, valuations are not perceived as extended, and I think I agree in many cases, especially if our economy continues to improve. It’s not a time to chase stocks, but it’s not a time to sell. Our stops will tell us when.

Filed under Economy, Markets Commentary Tagged with ,

When the Worm Turns (or Gets Squiggly)

January 30, 2013 Leave a comment

We’re looking at a weak close to the markets today, something not seen for awhile. Could all the talk about the return of the individual investor be calling a near term top? Is the market getting edgy about the coming congressional budget battles? We could easily see a pullback here after an 8% move in the S&P starting on the last trading day of 2012 (20 days in total if we turn today.)

On the positive side Q4 earnings have been pretty good, after expectations were trimmed back last fall, and many companies are using their cash to up dividends, buy back stock, and look for acqusition candidates; all of which adds to support for the markets. Plus, today the Fed said that they will continue to supply liquidity to the economy/banks/markets.

Of course the big negative is political, and I think the big funds will soon use the upcoming congressional fights as a reason to take some profits. A sell off could take high multiple, parabolic stocks back quite a bit, and solid dividend payers much less, maybe getting us to 3-5% back in the major indices.

There has been broad market participation in this last move up so hardly any industry group looks cheap right now. If there’s a sell off keep your eyes on the businesses that did well in the last 1/2 of last year, and continue to have a bias for dividend stocks. If the economy holds up this year it looks to be good for most industries. If interest rates creep up somehow I’ll be nervous about bonds and utility stocks. As well, it may be time to be a little more selective in tech.

I may have to post a retraction of this market retraction post-maybe tomorrow-but the worm is looking squiggly at 12:50 west coast time.

Filed under Economy, Investment Management, Markets Commentary Tagged with ,

Trends I Think I’m Seeing

December 26, 2012 Leave a comment

While we’ve all been kind of mesmerized by the economic and fiscal soap operas here and in Europe I think I’m seeing some interesting and positive trends trends developing in the U.S. economy.

Many of the big economic and fiscal issues have been centered around a rapidly changing job market. Predicitions of sustained high unemployment and obsolete jobs seem to have become reality. Technology and offshoring have impacted manufacturing significantly over the last ten years especially. In recent years brick and mortar retailing is succumbing to virtual retailers while high tech and legal professional jobs are being offshored.

So, taking our eyes off these established trends for now, here are some positive trends that I think will begin to develop or accelerate in 2013:

  • High Tech Manufacturing will find it’s way back to the U.S.
  • Business Crowdfunding will stimulate entrepreneurship and local economies.
  • Free Online Courses will mitigate the cost of higher education and raise workforce skill levels.
  • Local Hospitals and Doctor Groups will combine to offer an improved healthcare solution.

I’ll be posting developments and my thoughts on these four trends, and the trends they inspire, as we move into the New Year. In the meantime stock markets seem to be seeing something coming that they like. European markets and China have been rallying, Japan seems to be turning up after decades, and our market has held up well in the face of an over-hyped fiscal turning point.

Filed under Economy Tagged with ,

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