by phil - April 23rd, 2014 8:24 am
What a recovery!
Things are so good, they could hardly be better – as long as we ignore the non-existent volume that this house of cards is being built on, of course. 80M shares traded on SPY is half of the volume we got during the sell-off but it doesn't take 2 up days to make up for one down day – not at all. In fact, it's only taken 5 up days with a total of 548M shares traded to erase 6 prior days of declines in which 860M shares were traded to the down side.
Still, we have to respect the phony technicals while they last and it's not like we're not willing to play along. Our Long-Term Portfolio remains very bullish, as we only expected a short-term correction anyway, and has jumped $13,000 (2.6%) since last Thursday's review. So GO MARKETS, from that perspective. We don't care if it's a fake rally – as long as we can make some real money trading it, right?
Yesterday we did a Live Trading Webinar (replay available here) where we reviewed a dozen bullish trade ideas in 90 minutes and today, at noon (EST) we will do a special presentation expanding on our "7 Steps to Constistently Making 30-40% Annual Returns" featurning two additional trade ideas and you can sign up for a FREE CLASS RIGHT HERE. Here's the intro video:
And what is step one of our 7 step program? Wait for a sell-off! Well, we just got one and that's why we found lots of things to buy. Despite our Long-Term Portfolio's impressive gains over the past two days, it's still playing catch-up to our Income Portfolio, which is up 7% for the year because we cashed it out at the top in March and now we are able to go on a shopping spree, picking up things that have gotten cheap in the recent sell-off.
by Option Review - April 22nd, 2014 1:57 pm
by Sabrient - April 22nd, 2014 9:40 am
Reminder: Sabrient is available to chat with Members, comments are found below each post.
Yesterday, the market continued its winning ways for the fifth consecutive day. The S&P 500 closed within 1% of its all-time high, and the DJI was even closer to its all-time high. Healthcare, Energy and Technology led the sectors while Financials, Telecom, and Utilities finished slightly in the red. All three sectors in the red are typically flight-to-safety stocks, so despite lower than average volume, the market appears poised to make new highs.
Mid-cap Growth led the style/caps last week, up 2.87%, and Small-cap Growth trailed, up 2.22%. This week will bring well over 100 S&P 500 stocks reporting their March quarter earnings. AMD, Hal and KMB highlighted yesterday’s earnings reports. Those reports were supplemented by a stronger than expected Leading Economic Indicators report yesterday morning.
After yesterday’s close, Netflix reported an earnings beat and the stock was up nearly 8% after hours; however, McDonald's (MCD) trailed estimates on slumping U.S. Sales. In addition to earnings reports, chain store sales, existing home sales, building permits, new home sales, jobless claims, and durable goods will round out the busy week and likely determine the market’s direction.
Treasuries were flat despite a robust market, so a continued rally is not assured. Our forward 30-90 day sector outlook favors Technology and Healthcare, but there is still a little fear with Utilities third. We continue to find undervalued growth stocks for you to consider during this earnings season.
3 Stock Ideas for this Market
The following stocks were selected from the top of our stock universe with great earnings growth projections, reasonable valuations and recent upward revisions to earnings estimates.
Valero Energy Corporation (VLO) –Energy
- Trading for 11x current earnings and 9x forward earnings estimates
- Analysts have revised earnings estimates up in the last 7 days
- 99% projected EPS growth next quarter, 35% in 2014, 13% 5-year
- Reports Earnings April 29
KapStone Paper and Packaging Corporation (KS)—Basic Materials
- Trading for 20x current earnings and 10x forward earnings estimates
by phil - April 22nd, 2014 8:06 am
Check out this chart from David Fry:
65M was the total volume for SPY for the day and, as you can see from the volume bars, almost all of that came early in the morning, followed by a dead afternoon in which we drifted higher on NO volume at all. Nothing has changed, it's the same manipulated BS we had at the beginning of the month – only now at much lower volumes.
How can we change our minds about stocks when the data we're looking at is statistically insignificant? What is statistically significant is the Chicago Fed's National Activity Index – one of the most reliable indicators of GDP – and it's pointing down yet again. The CFNAI is a composite of 85 monthly indicators measuring all sorts of things like Manufacturing, Sales, Inventories, Prices, Shipping, etc. and, this month (March) 34 of them were negative. Sure that means 51 were positive but the net was 0 and AGAIN, I ask you, is that the kind of data that we should be paying all-time high prices for stocks against?
I'm not saying the economy sucks. In fact, it's fantastic for the top 10%. I'm just saying that it's NOT the kind of broad-based recovery that makes me want to place long-term bets at 20+ multiples of earning because, as we discovered in 2008, those earnings projection can quickly turn out to be nothing but BS and the very last people to see it coming are the CEOs and CFOs who make those projections.
As earnings reports are coming in, we're getting mixed signals. 85 of the S&P 500 have reported so far and 67% (57) have beaten on the revenue side, which sounds nice but it's below the 73% average and usually 58% beat on revenues (not that great, actually) but, so far, just 51% are over the line. Half, that's half. That means half the companies reporting are FAILING to make earnings – even with lowered expectations (the weather, late Easter, Bitcoin, Ukraine, Flight 370 – pick an excuse).
by ilene - April 21st, 2014 7:19 pm
The unsettling market plunges of two weeks ago have stopped (at least for now), and stock prices have recovered a bit. So now everyone's getting cautiously bullish again.
Everyone except me.
I still think stocks are poised to have a decade or more of lousy returns.
Three simple reasons:
- Stocks are very expensive
- Corporate profit margins are at record highs
- The Fed is now tightening
I'll go through this logic in detail below.
But first, a quick description of what I mean by "a decade or more of lousy returns" — and a note on how I am positioning my own portfolio in light of this view.
To be clear: I don't know what stocks are going to do next. They could go higher from today's already high prices, the way they did from similar levels in the late 1990s. They could crash, the way they did in 2000, 2007, and many other periods in which prices were (almost) this high. They could stay flat for years, the way they did in the late 1960s and '70s. All I know is, unless "it's different this time" — the four most expensive words in the English language — stocks are priced to return only about 2.5% per year for the next decade, a far cry from the 10% per year long-term average.
I own lots of stocks, though, and I'm not selling them. Why not? Many reasons, including:
- I have a diversified portfolio (stocks, bonds, cash, real estate), which will cushion the blow of a crash
- I am psychologically comfortable with the possibility of a 40%-to-50% market crash, and I know exactly what I will do if we get one (buy stocks). If you aren't comfortable with the possibility of a crash of this magnitude, you should either get comfortable with it or reduce your stockholdings. Otherwise, you might panic and sell after a crash, which is the worst thing you can do.
- No other asset classes are attractively priced, either. Unfortunately, it looks as though we're set
by phil - April 21st, 2014 7:52 am
This has been the flow of Bloomberg's "Smart Money Flow Indicator" and, as Zero Hedge wonders: Just who is soaking up what the smart money is selling? Company Buybacks, Johnny 5 (tradebots) or the Greater-Fool Retail Investors?
What is clear is the institutional investors, the so-called "smart money" are dumping shares like there's a crash – only there isn't any apparent crash – the indexes are pretty much holding on fine, making their losses back on low-volume days while steadily selling off on higher-volume days, which needs to a massive net outflow of "smart money" replaced by a steady supply of "dumb money".
Of course, there's no money dumber than the Fed, who buy and buy and buy and buy and then, when it's hard to remember a time when they weren't buying – they buy some more.
Rather than show you the Fed's $4Tn balance sheet again – let's take a look at where the money went. Oh, there it is – right in the banks balance sheets! The Fed has essentially borrowed money, on your behalf, and GIVEN it to their member banks at 0.25% interest (ie. FREE) who CLEARLY are not lending it out.
And why should they? They can simply turn around and buy TBills by leveraging their cash 10x (banks can do that) and collect 3% for 10 years X 10 = 30% while the Fed charges them 0.25% for a 29.75% annual profit on every dollar. Why then, should they lend it to you? Why should they offer you interest on your deposits when the Fed gives them all the money they want for free?
Banks USED to perform an important economic function that would save and protect your hard-earned money and your money was then lent out to other hard-working people so they could buy homes and cars and invest in businesses. Not any more, now banks only lend to Corporations and people with pristine credit (auto companies have to do their own lending), although they do let you buy things…