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Sector Detector: Semiconductors get slammed as investors scramble to protect profits

Courtesy of Sabrient Systems and Gradient Analytics

Volatility continues to increase in the stock market and many of the leaders are breaking down. In particular, semiconductors took a rather big hit when one of the bellwethers warned of weakening global demand. Nevertheless, despite the significant headwinds, I do not think this spells the end of the bull market. But the technical damage to the charts is severe, particularly to the small caps, which are in full-blown correction mode. The large caps must show leadership and rally immediately — or it will put at risk the critical and widely-anticipated year-end rally.

In this weekly update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart, review our weekly fundamentals-based SectorCast rankings of the ten U.S. business sectors, and then offer up some actionable trading ideas, including a sector rotation strategy using ETFs and an enhanced version using top-ranked stocks from the top-ranked sectors.

Market overview:

So far in October, the market already has seen five days with moves greater than 1%, which is as many such days as we saw in the prior five months combined. Jeff Macke observed in Yahoo! Finance that nearly one third of every trading day in the month of October since 1970 has seen 1% movements, up or down, including the infamous Black Monday of 1987. Heck, even the great Wall Street Crash of 1929 commenced in October.

No, weakness in October is not unusual, and this year in particular, because it has been so long since the broad market has pulled back in a meaningful way, I see it as a welcome cleansing that should validate some key support levels, wring out some excesses and overbought technical conditions, and establish a base from which to kick off the highly anticipated year-end rally.

Germany announced on Monday that factor orders fell -5.7%, which heightened fears among an already fearful investor community that Europe is worse off than thought. But then on Wednesday, the Dow Jones Industrial Average saw its best percentage gain of the year when the FOMC minutes expressed concern about the strong dollar and global economic weakness, which suggested that interest rate hikes are still a long ways off.

But then Thursday brought the worst daily point drop of the year, and the NASDAQ Composite endured its…
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Sector Detector: Overdue market weakness finally hits, but sector rankings turn bullish

Courtesy of Sabrient Systems and Gradient Analytics

Scott MartindaleThis seasonally weak time of the year has proven reliable once again. As I observed last week, the volatility index often hits a peak in October but has never hit a trough during this notorious month. Last week, I warned of more downside in stocks before any new highs are challenged. It was the type of week that tests investors’ bullish conviction, and it was way overdue.

So, is that it for downside this year? Is the market ready to commence its end-of-year rally now? Well, the charts appear to be in recovery mode, and our fundamentals-based sector rankings have turned bullish. But with volatility setting in, I don’t think we have seen the last of the scary market action. Will the S&P 500 fall into the -10% correction that we haven’t seen in three years? I think it is unlikely at this time, but I expect further consolidation and testing of bullish conviction in the near term.

In this weekly update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart, review our weekly fundamentals-based SectorCast rankings of the ten U.S. business sectors, and then offer up some actionable trading ideas, including a sector rotation strategy using ETFs and an enhanced version using top-ranked stocks from the top-ranked sectors.

Market overview:

The fourth quarter kicked off with a new flavor — extreme market weakness. Not only did the large caps finally shows some vulnerability, but small caps are now looking like they are in a full-blown correction from their highs reached back in July. But weakness in October is not unusual, and in fact I see it as a welcome cleansing that should validate some key support levels, wring out some excesses and overbought technical conditions, and establish a base from which to kick off the highly anticipated year-end rally.

Of course, one major signal on Friday that investors applauded was the unemployment report showing a dip to 5.9%, which is its first time below 6% since 2008. 248,000 jobs were added in September and August was revised upward from 142,000 to 180,000. Also, the ISM Services report came in at a robust 58.6.

Earnings reports for Q3 kick off this week, and according to Capital IQ, S&P 500 companies in aggregate are expected to…
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Sector Detector: Stocks fight off predictable weakness, but expect more downside

Courtesy of Sabrient Systems and Gradient Analytics

Yes, the market showed significant weakness last week for the first time in quite a while. In fact, the Dow Jones Industrial Average moved triple digits each day. But it was all quite predictable, as I suggested in last week’s article, and certainly nothing to worry about. Now the market appears to be poised for a modest technical rebound, and longer term, U.S. equities should be in good shape for a year-end rally. However, I still believe more downside is in order before any new highs are challenged. Moreover, market breadth is important for a sustained bull run, so the challenge for investors will be to put together broader bullish conviction, including the small caps.

In this weekly update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart, review our weekly fundamentals-based SectorCast rankings of the ten U.S. business sectors, and then offer up some actionable trading ideas, including a sector rotation strategy using ETFs and an enhanced version using top-ranked stocks from the top-ranked sectors.

Market overview:

Last week’s weakness was expected for a variety of reasons, including the weak near-term technical picture and the fact that the week following a triple (or quadruple) witching options expiration day (like the prior Friday) is usually negative. So, there was nothing concerning at all about last week’s increased volatility and market turbulence. On the contrary, it was welcome cleansing action.

The U.S. economy has been showing steady strengthening while other developed markets are languishing. Q2 GDP grew at an impressive rate of +4.6% annual rate (after the Q1 contraction of -2.1%), and many economists are revising upward for Q3 to above +3%. Also, consumer spending grew by +2.5% annual rate, business investment +9.7%, and exports +11.5%, while consumer sentiment has improved. So, with quant easing programs in place around the world creating abundant global liquidity seeking safe and attractive return in the face of escalating turmoil, violence, and terrorism, there has been a flow of capital into U.S. stocks and bonds and a notable strengthening in the U.S. dollar (particularly against the yen and euro).

This has helped keep stock and bond prices high and inflation low, thus giving the Fed room to remain accommodative. And it intends to do so, even after accumulating $4.5 trillion in assets…
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Sector Detector: Bulls leverage hopeful news to launch a tepid breakout attempt

Courtesy of Sabrient Systems and Gradient Analytics

Scott MartindaleStocks were able to leverage some optimistic news and dovish words from the Fed to take another stab at an upside breakout attempt last week. Although readers have sometimes accused me of being a permabull, I am really a realist, and the reality is that the slogans like “The trend is your friend” and “Don’t fight the Fed” are truisms. And they have worked. Nevertheless, I am still not convinced that we have seen the ultimate lows for this pullback, especially given the weak technical condition of small caps.

In this weekly update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart, review our weekly fundamentals-based SectorCast rankings of the ten U.S. business sectors, and then offer up some actionable trading ideas, including a sector rotation strategy using ETFs and an enhanced version using top-ranked stocks from the top-ranked sectors.

Market overview:

Bulls got a solid show of support from friends in high places last week. Of course, the biggest drivers of the stock market’s strong performance has been 1) signs of an improving economy, 2) global liquidity provided by dovish central bankers, and 3) global turmoil pushing cautious investors with all that liquidity in their hands into the relative safety and quality of U.S. securities of all types. The FOMC statement on Wednesday indicated no change in the dovish policies and no threat of an imminent move to raise short-term interest rates. ECB quant easing has led to a fall in the British pound and the euro. This has led to a notable strengthening in the U.S. dollar, which has helped keep inflation low, thus giving the Fed room to remain accommodative, which in turn is supportive of elevated valuation multiples in equities.

The 10-year Treasury closed Friday at 2.57%, which is down slightly from the prior week. I still think there is greater downside potential in the 10-year yield, especially given global liquidity and the resulting demand for the safety of U.S. Treasuries. Inflation is hard to find, and many economies around the world are trying to stave off recession and deflation (including Europe and Japan). Low interest rates could be with us for a while.

After 5.5 years of a liquidity-fueled bull market, many observers are saying the market is getting long in…
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Sector Detector: Bulls go down swinging, refusing to give up much ground

Courtesy of Sabrient Systems and Gradient Analytics

Although the stock market displayed weakness last week as I suggested it would, bulls aren’t going down easily. In fact, they’re going down swinging, absorbing most of the blows delivered by hesitant bears. Despite holding up admirably when weakness was both expected and warranted, and although I still see higher highs ahead, I am still not convinced that we have seen the ultimate lows for this pullback. A number of signs point to more weakness ahead.

In this weekly update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart, review our weekly fundamentals-based SectorCast rankings of the ten U.S. business sectors, and then offer up some actionable trading ideas, including a sector rotation strategy using ETFs and an enhanced version using top-ranked stocks from the top-ranked sectors.

Market overview:

The Dow Jones Industrials, S&P 500, and NASDAQ all broke their string of five weekly gains, even though the bulls were reluctant to give up much ground. We are now halfway through the historically weak month of September, including the always worrisome 9/11 anniversary, and so far the bulls have shown little inclination to throw in the towel. Somewhat surprisingly given overall market weakness, traditionally-defensive sector Utilities was the weakest sector last week. Energy and Basic Materials were also weak, while Healthcare held up the best. With the yield on the 10-year U.S. Treasury closing Friday at 2.61%, we have seen some weakening in Treasuries, and thus in higher-yielding Utilities stocks, as well. Also, the U.S. REIT index fell 3%.

All eyes will be on Wednesday afternoon’s FOMC policy statement and their current sentiment regarding interest rates. I still think there is greater downside potential in the 10-year yield, especially given global liquidity and the resulting demand for the safety of U.S. Treasuries. Moreover, ECB quant easing has led to a fall in the British pound and the euro. This has led to a notable strengthening in the U.S. dollar, which has helped keep inflation low, thus giving the Fed room to remain accommodative, which in turn is supportive of elevated valuation multiples in equities.

Nevertheless, although I expect the market to finish the year higher than it is now, there are plenty of reasons to be concerned about near-term market weakness. For example, according to the…
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First Trust Rolls Out Active Long-Short ETF

Courtesy of Sabrient Systems and Gradient Analytics

First Trust, the sixth-largest U.S. issuer of exchange traded funds, will introduce the First Trust Long/Short Equity ETF (NYSEArca: FTLS). The new actively managed ETF can take long and short positions in U.S. and international equities, using earnings quality as a primary determinant of stock selection.  Read ETF Trends article.





First Trust Rolls Out Active Long-Short ETF

Courtesy of Sabrient Systems and Gradient Analytics

[From article by Tom Lydon at ETFTrends.com]

First Trust, the sixth-largest U.S. issuer of exchange traded funds, will introduce the First Trust Long/Short Equity ETF (NYSEArca: FTLS).

The new actively managed ETF can take long and short positions in U.S. and international equities, using earnings quality as a primary determinant of stock selection. FTLS will establish long positions in stocks deemed to have high earnings quality while short positions will be implemented in low earnings quality names. Read article.





Sabrient is looking for Software Engineers

Courtesy of Sabrient Systems and Gradient Analytics

Sabrient Systems is looking for two motivated individuals to join our IT group as Senior Software Engineers.  Candidates should have strong programming skills and a working knowledge of financial investments, company financial statements, and the stock market. Details here.





Sector Detector: Stock market breakout? Not so fast

Courtesy of Sabrient Systems and Gradient Analytics

Scott MartindaleWas that really a breakout? With the S&P 500 struggling around the 2,000 level for the past two weeks, Friday’s strong finish might seem like a bullish breakout. But the market has already given us a couple of false breakouts at this level, and although I see higher prices ahead, I’m still not convinced that we have seen all the near-term downside that Mr. Market has in store, particularly given we are now in the historically weak month of September. Also, the improving economy is a double-edged sword from an equity investor’s perspective as they are concerned that the Fed might feel the need to raise rates sooner than currently planned.

In this weekly update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart, review our weekly fundamentals-based SectorCast rankings of the ten U.S. business sectors, and then offer up some actionable trading ideas, including a sector rotation strategy using ETFs and an enhanced version using top-ranked stocks from the top-ranked sectors.

Market overview:

Yes, we are entering the historically weakest month of September, at least according to Stock Trader’s Almanac. However, the reality is that the average monthly loss is only -0.5%, and nearly half of the time the market finishes positive. Moreover, recent performances have bucked the averages, with solid gains in September the past two years and a robust +8.8% in 2010.

There is no doubt that the U.S. economy is strengthening while central banks flood world markets with liquidity, and global investors look to U.S. stocks and Treasuries for the unusual combination of more safety and higher returns. Hiring has surged starting with lower wage jobs but also with the expectation that higher wage jobs will soon follow. Corporate profits are at record highs and stock buybacks are raging. Also, oil prices have fallen as domestic production continues to rise. The European Central Bank has joined the other major central banks in lowering interest rates and launching its own version of quantitative easing, and much of that new liquidity should find its way into the relative safety of U.S. stocks and Treasuries.

And don’t forget, hedge funds are finding themselves way underweight in equities. After the ECB announced its stimulus program, David Tepper of hedge fund Appaloosa Management predicted that this signals…
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Six Companies Push Tax Rules Most

Reminder: Sabrient is available to chat with Members, comments are found below each post.

Courtesy of Sabrient Systems and Gradient Analytics

Gradient Senior Analyst Nicholas Yee reports on six companies that are using a variety of techniques to shift pretax profits to lower-tax areas. Featured in this USA Today, article, the companies include CELG, ALTR, VMW, NVDA, LRCX, and SNPS.

Six Companies Push Tax Rules Most

Excerpt:

Nobody likes to pay taxes. But some companies are taking cutting their tax bills to an art form that might be impossible to maintain long term, according to a report by Gradient Analytics.

Gradient Analytics’ analyst Nicholas Yee found six companies, including Celgene (CELG)Altera (ALTR)VMware (VMW)Nvidia (NVDA)Lam Research (LRCX) and Synopsys (SNPS) are using a variety of techniques to shift pretax profits to lower-tax areas, which are aggressive enough that they could attract attention from tax rule makers. Others have gotten tax benefits that are ending or already face Internal Revenue Service reviews.

There’s nothing necessarily nefarious about companies looking for ways to cut their taxes. But investors are growing increasingly interested in whether U.S. tax authorities will look to curb some of the techniques that are being used by companies. The fear is that some companies’ earnings could be at risk if tax policy makers invalidate tax-reduction techniques used, Yee says.

Read more here





 

Help One Of Our Own PSW Members

"Hello PSW Members –

This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible.  Feel free to contact me directly at jennifersurovy@yahoo.com with any questions.

Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts.  After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.)  Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.

http://www.youcaring.com/medical-fundraiser/help-get-shadowfax-out-from-the-darkness-of-medical-bills-/126743

Thank you for you time!

 
 

Zero Hedge

Public Health Expert Explains How to Prevent a Panic About Ebola: Tell the Truth!

Courtesy of ZeroHedge. View original post here.

Submitted by George Washington.

The head of the Center for Infectious Disease Research and Policy at the University of Minnesota – Dr. Michael Osterholm – is one of the world’s top infectious disease experts and a prominent public health scientist.

Dr. Osterholm just gave a talk shown on C-Span, explaining how to prevent the public from panicking about Ebola:

I categorically reject the idea that you can’t tell people you “don’t know” … because you’re afraid you’ll scare them.

 

There is a complete [scientific] literature on risk communications that says people are never frightened if you tell them you don’t ...



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Phil's Favorites

Challenge to Keynesians "Prove Rising Prices Provide an Overall Economic Benefit"

Courtesy of Mish.

The ECB has been concerned about falling consumer prices. I propose that's 100% stupid, yet that's the concern.

When the euro declined vs. the US dollar, the ECB was happy that inflation would inch back up. The fear now is that falling oil prices will take away the alleged gain of a falling euro.

With that backdrop, credit the Financial Times for the absurd headline of the week: Eurozone Fails to Benefit from Weak Currency as Oil Price Slides.
Pity the policy makers given the job of rescuing the eurozone from deflation.

The unorthodox steps the European Central Bank has taken since June – including a programme of private-sector asset purchases – have caused a steep fall in the eu...



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Market Shadows

Falling Energy Prices: Sober Look takes a Sober Look

Falling Energy Prices: Sober Look takes a Sober Look

What do falling energy prices mean for the US consumer? Sober Look writes a brief yet thorough overview of the consequences of the correction in the price of crude oil. There are good aspects, particularly for the consumer, bad aspects, and out-right ugly possibilities. For more on this subject, read James Hamilton's How will Saudi Arabia respond to lower oil prices?  In previous eras, Saudi Arabia would tighten the supply to help increase prices, but in this "game of chicken," the rules m...



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Stock World Weekly

Stock World Weekly

Newsletter writers are available to chat with Members regarding topics presented in SWW, comments are found below each post.

Here's this week's Stock World Weekly. Just sign in with your PSW user name and password. (Or take a free trial.)

#457319216 / gettyimages.com

 

...

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All About Trends

Mid-Day Update

Reminder: David is available to chat with Members, comments are found below each post.

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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Chart School

World Markets Weekend Update: The Selloff Moderates ... Except for Japan

Courtesy of Doug Short.

The world market selloff moderated over the past week, except for Japan's Nikkei 225. The top performer in my gang of eight world indexes (and the sole gainer) was Germany's DAX, which rose 0.70%. At the bottom of the heap, the Nikkei plunged 5.02%. The S&P 500, like most of the others on the list, posted its 4th weekly loss, down 1.02%

Despite its 10.64% year-to-date advance, the Shanghai Composite remains the only index on the watch list in bear territory -- the traditional designation for a 20% decline from an interim high. The index is down 32.56% from its August 2009 peak. See the table inset (lower right) in the chart below.

Here is a look at 2014 so far.

...

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OpTrader

Swing trading portfolio - week of October 14th, 2014

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Sabrient

Sector Detector: Semiconductors get slammed as investors scramble to protect profits

Courtesy of Sabrient Systems and Gradient Analytics

Volatility continues to increase in the stock market and many of the leaders are breaking down. In particular, semiconductors took a rather big hit when one of the bellwethers warned of weakening global demand. Nevertheless, despite the significant headwinds, I do not think this spells the end of the bull market. But the technical damage to the charts is severe, particularly to the small caps, which are in full-blown correction mode. The large caps must show leadership and rally immediately -- or it will put at risk the critical and widely-anticipated year-end rally.

In this weekly update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart, review our weekly fundamentals-based SectorCast rankings of the ten U.S. business sectors, and then offer up ...



more from Sabrient

Option Review

Release Of Fed Minutes, Icahn Tweet Boost Shares In Apple

Shares in Apple (Ticker: AAPL) are near their highs of the session in the final hour of trading on Wednesday, adding to the muted gains seen earlier in the day, following the release of the September FOMC meeting minutes and after activist investor and Apple shareholder Carl Icahn tweeted, “Tmrw we’ll be sending an open letter to @tim_cook. Believe it will be interesting.” Icahn’s tweet hit the ether at 2:33 pm ET and was met with a spike in volume in Apple shares. The stock is currently up 2.0% on the day at $100.75 as of 3:15 pm ET.

Chart – Apple rally accelerate...



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Digital Currencies

Bitcoin Has Been Getting Obliterated

Joe has found a place for Bitcoins, and if you hold a lot of them, you won't like it.

Bitcoin Has Been Getting Obliterated

Courtesy of 

Remember Bitcoin?

There's not much to say about it, except that it's doing TERRIBLY.

Here's a chart going back to earlier this summer. Charts don't get uglier than this.

Bitcoinwisdom

Interestingly, the Bitcoin industry continues to be quite excited about the prospects for the digital currency, and there continue to be announcements about expand...



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Promotions

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Pharmboy

Biotechs & Bubbles

Reminder: Pharmboy is available to chat with Members, comments are found below each post.

Well PSW Subscribers....I am still here, barely.  From my last post a few months ago to now, nothing has changed much, but there are a few bargins out there that as investors, should be put on the watch list (again) and if so desired....buy a small amount.

First, the media is on a tear against biotechs/pharma, ripping companies for their drug prices.  Gilead's HepC drug, Sovaldi, is priced at $84K for the 12-week treatment.  Pundits were screaming bloody murder that it was a total rip off, but when one investigates the other drugs out there, and the consequences of not taking Sovaldi vs. another drug combinations, then things become clearer.  For instance, Olysio (JNJ) is about $66,000 for a 12-week treatment, but is approved for fewer types of patients AND...



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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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About Ilene:

Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

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