by phil - December 3rd, 2013 7:58 am
To shop or not to shop, that is the question?
Today the question is also whether or not we should do a little bottom-fishing on this very minor pullback in the markets. To date, bottom fishers have been continuously rewarded (while our short positions have been pounded) but, on the whole, this is nothing more than the sell-off we expected – and just the start of it at that.
Our premise is that the Fed is already well baked into these index levels and now we need to see improving economic numbers to back up the exhuberance, which has taken us up about 15% since early October (1/2 the gains for the year).
Does 15% in 2 months seem like a lot to you? If we keep going at this pace, we'll be up 90% in 12 months and, while that may seem extreme, the S&P was at 666 in March of 2009 and now, just 4.5 years later, it's at 1,800 – up and AVERAGE of 37.5% per year since the Fed started meddling in the markets.
The Fed is not likely to stop meddling and, if we assume they meddle perfectly and there is no blowback ever, then we can look forward to another 37.5% next year and the Fed seems to have "learned their lesson" from the end of previous QE programs and is running QE3 without an end date, as the ends of QE1, QE2 and Twist all lead to decent pullbacks:
As we have demonstrated 3 times this year with our series of "5 Trade Ideas that can Make 500% in a Rising Market," as long as we can count on the Fed to keep things going, we will have endless opportunities to increase our wealth. I just finished writing up the first two weeks of our October Trade Review and a ridiculous 51 out of 59 trade ideas are already winners – and that includes the hedges! I'd say it's like shooting fish in a barrel but good luck shooting 86% of the fish…
by phil - December 3rd, 2013 2:22 am
And the madness continues!
We had our fabulous Las Vegas Conference last weekend so we're a bit behind this month and we ended the week at record highs. Our September Trade Review (Part 2) wasn't done until 11/2 anyway and Part 1 of September was completed on Oct 13th, when the market was just beginning to fly. (Chart by Dave Fry) We called the September action almost perfectly and, out of 112 trade ideas for the month, 96 (85%) were winners – an incredible percentage that actually improved upon August's 81%!
For some reason, people think I'm too bearish but that's because our SHORT-TERM Portfolio is full of bearish offsets to the bulk of our positions, which are NOT tracked until the reviews, because they are longer-term trades or day trades. Also, if we tried to track 112 additional trade ideas per month, we'd be just about getting to February now!
Options are not like stocks, we don't want 1,000 people all following the same trade (as I noted last month as well). That's why PSW is an educational site where our goal is to teach you to identify your own opportunities to BE THE HOUSE, Not the Gambler. By putting up an average of 5 trade ideas every trading day – we give our Members a huge variety of trade ideas that can fill in any portfolio. These trade ideas are highlighted daily in our Member Chat Room at PSW! Keep in mind that this is an arbitrary point in time and some trades could have had better (or worse) exits in between – we're not doing this to keep score, just to get an idea of what worked and what didn't in the past month so, hopefully, we can make better decisions this month.
by Sabrient - December 2nd, 2013 6:14 pm
Repeating Friday’s market performance, today, the S&P 500 sold off in the last 30 to 40 minutes, giving up its entire daily gain for a loss of 0.27%. Nevertheless, it did gain 0.1% last week for its eighth consecutive weekly gain.
The Small-cap Growth style/cap was the leader last week, gaining 1.58% and raising its leading one-year gains to 43.67%. The growth style continued to dominate value in all three major market cap ranges. Value delivered a negative performance for the week in both large- and mid-caps. (See market stats.)
Interestingly, all economic releases last week, and again today, beat estimates with only one exception, Consumer Confidence, which had been expected to be flat at 72.4, actually dropped to 70.4. Those indicators beating estimates included Building Permits, Jobless Claims, Durable Goods, Chicago PMI, Michigan Sentiment and Leading Economic Indicators. A few were actually down a bit but still beat estimates. Today, both the Manufacturing ISM index and Construction Spending for October were up and above estimates.
Two disquieting notes are the sharp drops in major indices during the last 30 minutes of trading and the sharp rise in the VIX fear index, up 5.9% on Friday and another 3.87% today, closing at $14.23. Volume was quite weak last week as expected, but it was also below normal levels today. Clearly, there was disappointment in brick and mortar holiday and Black Friday sales, down approximately 3% from last year. However, online sales were up a similar amount percentage wise. Accordingly, brick-and-mortar chains were down sharply today, while eBay Inc. (EBAY) and other online retailers were up. Amazon.com Inc. (AMZN) was off 0.41%.
What should we take from all of this?
Well, the rise in the VIX, while much closer to historic lows than highs, dictates caution. As do the late sell-offs. We feel valuations, while higher than the past few years, are still historically reasonable, and true bargains can be found as our weekly searches have demonstrated throughout the year. Good news from congressional dysfunction or the ObamaCare fiasco would certainly help.
3 Stock Ideas for this Market
I selected the following stocks from a custom search looking for undervalued growth stocks with recent upward analyst revisions in MyStockFinder (*all data below from Yahoo! Finance):
Marvell Technology Group Ltd. (MRVL) –Technology
by ilene - December 2nd, 2013 4:36 pm
Courtesy of Wade at Investing Caffeine
As I ponder this year’s events with a notch-loosened belt after a belly-busting Thanksgiving gorging, I give thanks for my many blessings this year (see my last year’s Top 10). Investors in the stock market have had quite a feast in 2013 as well, while pessimistic bears have gotten cooked. Just this month, stock indexes reached all-time record highs (16,000 for the Dow Jones Industrial average and 1,800 for the S&P 500). Even the tech-heavy NASDAQ index surpassed 4,000 – a level not seen since 1999. How does this translate in percentage terms? Here’s what the stellar 2013 numbers looks like so far:
- Dow Jones: +22.8%
- S&P 500: +26.6%
- NASDAQ: +34.5%
These results demolish the near 0.0% returns earned on the sidelines, sitting on cash. And worth noting, these gains become even more impressive once you add dividends to the mix. To put these numbers into better perspective, it would take you more than a few decades of your lifetime to achieve this year’s stock gains, if your cash was invested at today’s CD and savings account rates.
For the bears, the indigestion has become even more unbearable if you consider the 2013 bloodbath in gold. The endless mantra of unsustainable QE (Quantitative Easing) hasn’t played out quite as the cynics planned this year (see also QE – Greatest Thing Since Sliced Bread):
- CBOE Gold Index (GOX): -51.5%
- SPDR Gold Shares (GLD): -25.5%
Bonds have been challenging too. Investors and Nervous Nellies have not been able to hide in longer-term Treasury bonds or broader bond indexes without some pain during 2013:
- iShares 20-Year Treasury Bond (TLT): -13.8%
- iShares Total U.S. Bond Market (AGG): -3.3%
As I’ve preached in the past, bonds have a place in most portfolios for income and diversification purposes, and many of my clients own them in their portfolios. But not all bonds are created equally. At Sidoxia (Sidoxia.com), we’ve smoothed out interest rate volatility and even recorded some gains by investing in specific classes of bonds such as short duration, floating rate, and convertible securities.
Why the Turkey High?
by Option Review - December 2nd, 2013 4:32 pm
by Sabrient - December 2nd, 2013 12:25 pm
“It is a mistake to look too far ahead. Only one link in the chain of destiny can be handled at a time.” -- Winston Churchill
With the US equity markets hitting new highs on what seems a daily basis as of late, investors may be forgiven if they haven’t been tracking the European economy as closely as they had in the recent past, when the Eurozone seemed to be in perpetual crisis mode.
And, with the region recently emerging, though ever so barely, from its most recent multi-year recession, the morbid fascination with the Eurozone shifted to something closer to mild disinterest.
The fact is that the European bourses have mainly mirrored Wall Street’s success this year, though to a somewhat lesser degree.
For example, while the S&P 500 index has gained over 27% year-to-date as of last Friday, VGK (Vanguard FTSE Europe ETF), which is the largest of the European equity ETFs in terms of capitalization, was up 16.99%.
VGK tracks the FTSE Developed Europe Index, which consists of over 500 common stocks of 17 European countries, and serves as a reasonable proxy for the region’s equity markets.
The thing is, the uptrend in the area’s economy is at least partially based on the perception that the Eurozone has become a more stable market, which can be greatly attributed to the European Central Bank’s (ECB) bold proclamations that it is ready to take whatever action is required to keep the monetary union intact.
One of the tools used by the ECB back in late 2011 was the LTROs, long-term refinancing loans that served to introduce increased liquidity into a banking system that was seriously flailing at the time.
The first wave of LTROs was wildly successful in its mission, and a second wave followed not long after.
The cheap loans to the banks totaled $1.36 trillion dollars and were widely credited as a key to stemming the flow of blood being spilled by the PIIGS (Portugal, Ireland, Italy, Greece and Spain) at that time.
Fast-forward to the present, and a large portion of the cheap money has been repaid to the ECB by the banks. As a result, excess liquidity has reverted to 2011 levels.