It’s awfully quiet out there. Perhaps too quiet.  #-ad_banner-#The S&P hasn’t made a 1% move — in either direction — since April 16.  How unusual is it for the market to go 43 trading sessions (and counting) without a one-day move of 1% or more? Going back to 1980, the market has only had three longer streaks, according to MKM Partners’ Jonathan Krinsky. If we reach 48 straight days without a 1% move, this current streak will move into third place.  What happens when such streaks end? The market has invariably dropped at least 3% within a month of the… Read More

It’s awfully quiet out there. Perhaps too quiet.  #-ad_banner-#The S&P hasn’t made a 1% move — in either direction — since April 16.  How unusual is it for the market to go 43 trading sessions (and counting) without a one-day move of 1% or more? Going back to 1980, the market has only had three longer streaks, according to MKM Partners’ Jonathan Krinsky. If we reach 48 straight days without a 1% move, this current streak will move into third place.  What happens when such streaks end? The market has invariably dropped at least 3% within a month of the streak’s end, according to MKM.  As you’d expect in such a quiet market, investors are exhibiting little fear. In a weekly survey of investor sentiment, the American Association of Individual Investors (AAII) noted that roughly 45% of responders were bullish. That’s the highest reading yet for 2014.  And the VIX, also known as the fear gauge, has fallen back to very low levels. “The perception of U.S. equity market risk is as low as it has been since 2004-06 when Fed predictability peaked,” notes UBS’s Maury Harris.  Indeed, the Federal Reserve’s announcement earlier this year that it will steadily reduce… Read More

All major U.S. indices finished last week in negative territory, giving back a significant portion of their May gains. Interestingly, the decline was led by the defensive Dow industrials, while the Nasdaq 100 and Russell 2000 fared better, down just 0.5% and 0.2%, respectively. Despite the decline, all major U.S. indices except for the Russell are still in positive territory for the year. #-ad_banner-#The only sector of the S&P 500 that finished last week in the black was energy, gaining 1.7%. My own asset flow-based metric shows that the largest sector bet-related inflows over the past one-week, one-month and three-month… Read More

All major U.S. indices finished last week in negative territory, giving back a significant portion of their May gains. Interestingly, the decline was led by the defensive Dow industrials, while the Nasdaq 100 and Russell 2000 fared better, down just 0.5% and 0.2%, respectively. Despite the decline, all major U.S. indices except for the Russell are still in positive territory for the year. #-ad_banner-#The only sector of the S&P 500 that finished last week in the black was energy, gaining 1.7%. My own asset flow-based metric shows that the largest sector bet-related inflows over the past one-week, one-month and three-month periods were in energy. Largely due to these inflows, energy has outperformed with an 11.2% year-to-date gain versus 4.8% for the S&P 500. Trend Still Bullish, but Beware of Seasonal Headwinds In the May 12 Market Outlook, I pointed out an emerging bullish pattern in the SPDR Dow Jones Industrial Average (NYSE: DIA). I said, “A sustained rise above $165.51 would confirm a breakout from four months of sideways indecision in DIA that would target a 7% advance to $177.” The breakout I was expecting actually took place on… Read More

All major U.S. indices finished last week in positive territory, led by the Russell 2000 and Nasdaq 100. As I said in last week’s report, this is always a near-term positive sign for the overall market as small-cap and technology stocks typically lead the S&P 500 both higher and lower. #-ad_banner-#​Outperformance by these areas of the market indicates that investors are in a “risk on” mode and are willing to buy riskier, more volatile stocks to capture a better return. Last week’s strong performance by the Russell 2000 puts it back into positive territory year to date for the first… Read More

All major U.S. indices finished last week in positive territory, led by the Russell 2000 and Nasdaq 100. As I said in last week’s report, this is always a near-term positive sign for the overall market as small-cap and technology stocks typically lead the S&P 500 both higher and lower. #-ad_banner-#​Outperformance by these areas of the market indicates that investors are in a “risk on” mode and are willing to buy riskier, more volatile stocks to capture a better return. Last week’s strong performance by the Russell 2000 puts it back into positive territory year to date for the first time since April 4. There, it joins the other major U.S. indexes, led by the Nasdaq 100, which is up 5.6% in 2014.  From a sector standpoint, last week’s broad market advance was led by industrials (+2.3%), financials (+2.3%) and consumer discretionary (+1.9%). Meanwhile, defensive sectors like health care and consumer staples were relatively weak.  Recent Breakouts Point to More Near-Term Strength In the May 27 Market Outlook, I said the rise above 3,617 in the Nasdaq 100 “clears the way for more near-term strength and a potential 2% rise to retest the 3,738… Read More

While I am not a “perma-bear” by any means, I must admit that I’ve been perplexed by this unrelenting, “to the moon” bull market, which hasn’t really cooled off since it began over five years ago. #-ad_banner-#New highs are the norm now, with the market shrugging off bad news and eating up any bit of good news. Nearly every index is outperforming, many without so much as a small pullback here and there. But notice that I said “nearly” — one index group in particular has recently cooled off, which makes me think that others could… Read More

While I am not a “perma-bear” by any means, I must admit that I’ve been perplexed by this unrelenting, “to the moon” bull market, which hasn’t really cooled off since it began over five years ago. #-ad_banner-#New highs are the norm now, with the market shrugging off bad news and eating up any bit of good news. Nearly every index is outperforming, many without so much as a small pullback here and there. But notice that I said “nearly” — one index group in particular has recently cooled off, which makes me think that others could follow suit by the end of this year. I’m talking specifically about indices made up of stocks with smaller market caps. It’s well known that small-cap stocks perform better than their larger counterparts over time, especially coming out of a recession, when growth is easier to come by. However, when the market slows down and investors turn to large-cap stocks for stability and dividends, small-caps are the first to get snubbed. Any downturn following that peak often sees small-caps getting beaten up at close to the same rate they grew in the first place. In the… Read More

A long period of slow economic growth and dormant inflation has led to almost universal complacency.  #-ad_banner-#Everyone continues to repeat the same mantra that the Federal Reserve will continue to support the economy through ultra-low interest rates well into the future. Yet beneath the surface, the economy is beginning to rumble, and such a benign view can catch the market off guard. And as soon as June 6, the investor chatter may start to take on a very different tone. That day will bring the all-important monthly employment report, which is likely to produce a gain of at least 200,000… Read More

A long period of slow economic growth and dormant inflation has led to almost universal complacency.  #-ad_banner-#Everyone continues to repeat the same mantra that the Federal Reserve will continue to support the economy through ultra-low interest rates well into the future. Yet beneath the surface, the economy is beginning to rumble, and such a benign view can catch the market off guard. And as soon as June 6, the investor chatter may start to take on a very different tone. That day will bring the all-important monthly employment report, which is likely to produce a gain of at least 200,000 net new jobs for the fourth month in a row. The four-week moving average of weekly unemployment claims has moved to its lowest level in seven years, underscoring the improving health of the job market. Yet economists at Deutsche Bank think the forward view is more important. They looked at a series of recent economic data points and then took a fresh look at the current 6.3% national unemployment rate. Their conclusion: “Based on its current trajectory, the rate should fall significantly further over the next year and a half.”  Quite suddenly, the U.S. economy is shaping up to… Read More

All major U.S. indices finished last week in positive territory, led by the Nasdaq 100. This is a positive near-term factor for the overall market because technology stocks typically lead the broader market both higher and lower. For 2014, all major indices are in positive territory except for the small-cap Russell 2000, which is down 2.5%. #-ad_banner-#Despite the strong showing from the Nasdaq 100, the three strongest sectors last week were all defensive ones: utilities (+2.4%), consumer staples (+1.7%) and health care (+1.3%). This suggests investor apprehension that, should it continue, may lead into an overdue corrective decline later this… Read More

All major U.S. indices finished last week in positive territory, led by the Nasdaq 100. This is a positive near-term factor for the overall market because technology stocks typically lead the broader market both higher and lower. For 2014, all major indices are in positive territory except for the small-cap Russell 2000, which is down 2.5%. #-ad_banner-#Despite the strong showing from the Nasdaq 100, the three strongest sectors last week were all defensive ones: utilities (+2.4%), consumer staples (+1.7%) and health care (+1.3%). This suggests investor apprehension that, should it continue, may lead into an overdue corrective decline later this summer. Russell 2000, Google Still Key to Market Direction In the May 19 Market Outlook, I pointed out that the Russell 2000 had just tested and held major support at 1,083, saying, “As long as the Russell remains above it this week, I would view this level as a potential springboard for a new leg higher in the overall market.”   The index has since risen as expected, by about 6% into last week’s highs. The benchmark S&P 500 has risen by 3% to new all-time highs during that time. The chart shows the Russell… Read More

All major U.S. indices were higher last week, led by the previously downtrodden Nasdaq 100 (+2.5%) and Russell 2000 (+2.1%). Both of these market-leading indices must continue to outperform the broad market S&P 500 if last week’s strength is going to become the next leg higher within the larger 2013 stock market advance. The major indices are now all in positive territory for 2014 except for the small-cap Russell 2000, which ended last week down 3.2% for the year. #-ad_banner-#From a sector standpoint, my own asset flow-based metric shows the largest inflow of investor assets over the past week went… Read More

All major U.S. indices were higher last week, led by the previously downtrodden Nasdaq 100 (+2.5%) and Russell 2000 (+2.1%). Both of these market-leading indices must continue to outperform the broad market S&P 500 if last week’s strength is going to become the next leg higher within the larger 2013 stock market advance. The major indices are now all in positive territory for 2014 except for the small-cap Russell 2000, which ended last week down 3.2% for the year. #-ad_banner-#From a sector standpoint, my own asset flow-based metric shows the largest inflow of investor assets over the past week went into consumer discretionary, which led all sectors with a 2.1% gain. The utilities sector had the biggest outflow of investor assets and, as would be expected, was the only sector to lose ground for the week. Is Technology Leading the Blue-Chip Stocks Higher? Beginning in the April 21 Market Outlook, and again in several subsequent issues, I have been discussing overhead resistance at 3,617 on the Nasdaq 100 and stating that a rise above this level was necessary to indicate that this market-leading technology index’s larger November 2012 advance was resuming.  After negotiating this… Read More

There are so many issues to ponder about the proposed link-up between AT&T (NYSE: T) and DirecTV (NYSE: DTV) that it’s hard to know where to begin. But let’s start with short sellers.  #-ad_banner-#For nearly a year now, a growing number of investors have become convinced that steady-as-she-goes AT&T was drifting into oblivion. By the middle of April, the short position in this stock had reached 197 million.  Though the short position shrank by 12 million two weeks later, AT&T was still the most heavily shorted stock on the New York Stock Exchange — by a very wide margin. (AMD… Read More

There are so many issues to ponder about the proposed link-up between AT&T (NYSE: T) and DirecTV (NYSE: DTV) that it’s hard to know where to begin. But let’s start with short sellers.  #-ad_banner-#For nearly a year now, a growing number of investors have become convinced that steady-as-she-goes AT&T was drifting into oblivion. By the middle of April, the short position in this stock had reached 197 million.  Though the short position shrank by 12 million two weeks later, AT&T was still the most heavily shorted stock on the New York Stock Exchange — by a very wide margin. (AMD (NYSE: AMD) is next at 115 million shares.) One of the key concerns for shorts: AT&T’s inability to sustain its dividend. I looked into AT&T’s myriad challenges two months ago, noting that “simply maintaining the dividend will eventually push the payout ratio above 100%.” In announcing the deal, AT&T’s management was quick to suggest that DirecTV’s impressive cash flow will help AT&T support its dividend (currently yielding 5%).  DirecTV generates around $8 billion a year in EBITDA (earnings before interest, taxes, depreciation and amortization), and a little less than $7 billion after interest expenses are covered. DirecTV also spends more… Read More

The major indices were mixed last week, with the Dow industrials and Russell 2000 showing losses, the S&P 500 unchanged, and the recently downtrodden Nasdaq 100 posting a modest gain of 0.9%. The tech-heavy Nasdaq 100 must continue to outperform the S&P 500 from here, ideally accompanied by outperformance by the small-cap Russell 2000, if the current 2013 advance is to remain intact and begin a new leg higher. #-ad_banner-#From a sector standpoint, my own asset flow-based metric shows that the largest inflow of investor assets over the past week, month and quarter has been into energy, despite the sector’s… Read More

The major indices were mixed last week, with the Dow industrials and Russell 2000 showing losses, the S&P 500 unchanged, and the recently downtrodden Nasdaq 100 posting a modest gain of 0.9%. The tech-heavy Nasdaq 100 must continue to outperform the S&P 500 from here, ideally accompanied by outperformance by the small-cap Russell 2000, if the current 2013 advance is to remain intact and begin a new leg higher. #-ad_banner-#From a sector standpoint, my own asset flow-based metric shows that the largest inflow of investor assets over the past week, month and quarter has been into energy, despite the sector’s modest weakness last week. As long as this positive asset flow continues, the recent trend of relative outperformance by energy, which has beaten the S&P 500 by 7% since February, is likely to continue into the third quarter. Friday’s Rebound in Small Caps May Be a Good Sign In the April 28 and May 5 Market Outlooks, I discussed minor overhead resistance at 3,617 in the Nasdaq 100, and said that this market leading-technology index needed a sustained rise above this level to help power the broader market to fresh highs. The 3,617 level continues to… Read More

Although the U.S. stock market was generally stable last week, the tone remained cautious as the defensive Dow Jones Industrial Average was the only major index to post a gain, and that of just 0.4%. #-ad_banner-#As has been the case for much of the past two months, the tech-laden Nasdaq 100 and small-cap Russell 2000 were the weakest indices, losing 0.9% and 1.9%, respectively. These two market leading indices must begin to get some traction, and soon, if the broader market is to avert — or at least postpone — a summer correction. Nasdaq Composite Likely to… Read More

Although the U.S. stock market was generally stable last week, the tone remained cautious as the defensive Dow Jones Industrial Average was the only major index to post a gain, and that of just 0.4%. #-ad_banner-#As has been the case for much of the past two months, the tech-laden Nasdaq 100 and small-cap Russell 2000 were the weakest indices, losing 0.9% and 1.9%, respectively. These two market leading indices must begin to get some traction, and soon, if the broader market is to avert — or at least postpone — a summer correction. Nasdaq Composite Likely to Lead the Next Trend The sideways movement in the U.S. stock market this year doesn’t make for splashy headlines, but it does indicate investor indecision, which is where new price trends begin. The key to investing in this type of environment is being able to identify when the market makes that shift from indecision back to conviction, and right now one of the best indices to watch is the Nasdaq Composite. The Nasdaq Composite is situated right between major support at 3,990 to 3,980, which represents the 200-day moving average (major trend proxy) and Dec. 18 and Feb. 5… Read More