Sunday December 21, 214

$SPY If you are looking for a good book to read this holiday season try ‘Jesse Livermore – World’s Greatest Stock Trader’ by Richard Smitten and published by John Wiley & Sons, Inc.  It is a classic with much to be learned from Livermore, both what to do and what not to do.  I read this book each year just for that purpose.

Saturday December 20, 2014

$SPY After two straight sessions of big rallies, stocks slowed their paces slightly Friday. However, that didn’t stop bulls from finishing the week on an up note. Energy shares outperformed as crude oil prices rebounded more than 5%, while retailers pulled back.  The Major Markets Model remains Bearish for three of the four majors along with an Oversold status across the board.  Stocks were much oversold at the beginning of the week. In spite of gains in the last three sessions of the week, they are not overbought yet, suggesting more room to go on the upside. With that said, although VIX has dropped significantly from 23.57 on Tuesday to 16.48 Friday, a mid-teen VIX doesn’t suggest that volatility is gone. Expect more volatile moves down the road.

Currently the only Buy is the Russell 2000, which while also carrying an Oversold status has retained a Bullish Opinion through the most recent down turn.  However, this along with the current rally looks to be setting the stage for a Santa Clause rally in the next couple of weeks.

Both of our model portfolios have performed well over the past several weeks.  While not being totally immune from the volatility which has been driven by fear over the direction of crude oil prices and the staying power of the Russian Ruble, the swings have be tempered while significantly less than the general market and both portfolios are at or close to their yearly highs.

We will stay the course for the remainder of the year and finalize the rebalancing of the models at the conclusion of the trading year.

FactSet Street Account Summary - US Weekly Recap: Dow+3.03%, S&P +2.40%, Nasdaq +3.41%, Russell +3.78%

Have analysts become more pessimistic on media companies?

Sunday December 14, 2014

$SPY What one can say about the past week, technically, stocks are now in short term oversold territory.  The internal breadth of the market has been showing negative divergence of late and this past week the new 52-week lows hit triple-digits on both the NYSE and NASDAQ. The strange part of that is that the number of new 52-week highs was also in triple-digits for most of the week. The Market Model’s for the four indices which are followed uniformly turned to Sell at the Close Wednesday.

So what should we look for going forward? First, the broader market is still in a bullish uptrend and until support levels are broken the major trend is up. Next, keep an eye on the Russell 2000. The small cap index has been in a trading range and a move either above 1190 or below 1150 could provide the signal whether stocks are heading higher or lower.

On another note there was no trading activity in the Alpha One Model Portfolio and I am not anticipating too much in the coming week either.  In my opinion a good amount of last week’s decline in values will ultimately be laid at the feet of professional portfolio managers who sold aggressively in an attempt to preserve accrued profits into the calendar year end. Most of the impact from the decline of Crude Oil should have been priced into the markets earlier since OPEC clearly signaled their intent in late November.  Remain cautious, the recommended Asset Allocation Level is now 62.5% Long – 37.5% Cash.   

FactSet StreetAccount Summary - USWeekly Recap: Dow (3.78%), S&P (3.52%), Nasdaq (2.66%), Russell (2.54%)

Do analysts expect a rebound in energy earnings in2015?

Sunday December 7, 2014

$SPY The jobs report (nonfarm payrolls +321K with unemployment rate at 5.8% and hourly earnings +0.4%) sent both the DJIA and the S&P 500 to fresh records Friday. Although the jobs report gave the market a significant upside surprise, the reaction in stock prices was relatively minor. The jobs report didn’t give bulls any more momentum as the short term MACDs across the four major indices tracked by the Major Market Model are still heading lower. While stocks can continue to grind higher and the DJIA may make a run at 18000, there is no reason to be too excited over the jobs number.

The technical condition of the market remains mixed as the Momentum indicator continues to decline while the Strength indictors all move higher. Remain cautious into the yearend keep tight stop loss alerts and do not be afraid to take profits if individual names weaken.

The past week was a busy one for the Alpha One Portfolio process, first the Master List was updated and no contains 165 names down from 178 in the previous list.  However, the Buy component of the list is significantly higher reflecting the rotation into Industry groups which are more in favor with investors at this time.  As mentioned on Friday the following names were sold $KNX, $LRCX, $LUV, $MAR, $SNA.  Well into Friday’s session $GMCR was also sold as the Stop Loss had been violated and the technical condition continued to weaken.  The other names which were liquidated were sold as the result of their not being on the refreshed Master List.

These names were added to the portfolio to take the allocation to 75% in line with the current recommendation. $FL, $TMO, $DLTR, $PZZA, $AAPL and $MA.

Further sales were undertaken in the following names to rebalance the portfolio as we enter a new trading year. On January 2, 2015 the excess capital in the Alpha One Model will be transferred to the Alpha Two Model in accordance with the operating procedures for the portfolios leaving $60,000.00 to begin the New Year. The names effected by the rebalancing are $SWKS, $EA, $ROST, $MU, $CBG, $ALXN, $VRX and $BIDU.

FactSet Street Account Summary - US Weekly Recap: Dow+0.73%, S&P +0.38%, Nasdaq (0.23%), Russell +0.78%

Friday December 5, 2014

$ SPY Commencing today the annual re-balancing of the Alpha One Portfolio begins.  The new Master List will be published over the coming weekend along with the refreshed portfolio.     In the Alpha One portfolio those remaining positions will be down sized to about $3,000.00 each and new positions will be added at the same level as we move to the targeted 75% Long recommendation.

After January 1, 2015, the excess capital, the amount over $60,000.00 will be moved to the Alpha Two Portfolio and be equally invested in the thirteen holdings which make up that portfolio.

Today, I will close the following positions, since they now longer are included on the master list.  $KNX, $LRCX, $LUV, $MAR and $SNA 

Saturday November 29, 2014

$SPY Over the past week there was no trading in the Alpha One Model Portfolio.  The Alpha Model gained 355 basis points over the holiday shortened week while the S&P 500 Index gained 406 basis points in year-to-date performance. There is one open position in the Option category; I am carrying into the coming week a trade in the .SPY141220C207.  The trade is slightly under water but I am holding it into the coming week looking for 2.57 or better.

Current portfolio holdings are 66.3% Long and 33.7% Cash.  Will be watching $CAVM, $FFIV, $IDTI and $KMI with particular interest in the coming week for possible additions to the portfolio.

Besides the stronger economic data, low interest rates and stellar earnings released for the third quarter, the markets will continue to benefit from the drop in oil prices. The DJ Transportation Index continues to outperform with airlines, trucking and delivery stocks all making new highs. This week also saw strong moves in retail stocks as shoppers are putting money saved at the pumps into their holiday shopping.  

The first week of December usually has a negative bias as portfolio managers sell-off shares of stocks that are underperforming and adjust losing trades for tax purposes. After the rally off the October lows we could see lower prices in the next few days but the longer term trend remains up. My Year-end target for the S&P 500 remains at 2082.65

Saturday November 22, 2014

$SPY After gaping up at the open, stocks spent most of the day Friday fading off the opening rally. Just like what we saw on Wednesday, small cap and technology stocks led the fade and under performed.  In spite of weakened momentum, bulls stayed in control with another record close for the week. All of the indices in the Market Model including the S&P 500 are in overbought territory, but with the exception of the Russell 2000 any call for a pullback has been unanswered. As trees don’t grow to the sky, mean reversion will happen someday. But for now, dip buyers are still eager to jump in on any weakness. Near term downside is limited. The stock market is likely to turn quiet as we head into Thanksgiving.

In the coming shortened Thanksgiving week I will be looking to maintain the year-to-date profitability and will not be too active.  There are twenty one names on the current watch list with nine highlighted names worth closer attention on your part. 

Should the momentum continue I may add a few positions attempting to creep up to the recommended Asset Allocation range of 87.5%, but again not too aggressively.  With the Thanksgiving Holiday Thursday and the early close on Friday I am not expecting too much in the way of directional change in the coming week.

As a heads up, I will be working on the Master List Update over the coming two weeks in anticipation of releasing it in December 6^th post and Alpha One Model update.

FactSet StreetAccount Summary - US Weekly Recap: Dow+0.99%, S&P +1.16%, Nasdaq +0.52%, Russell (0.12%)

Friday November 21, 2014

$SPY The major averages continue to digest some of the recent gains but are still keeping an upward bias. While negative divergence is showing in some of the technical indicators and internal breadth numbers downside looks limited. Stocks will most likely drift higher ahead of the upcoming holiday week.

In light of the surprise move today by China to raise rates in an attempt to spur growth I will be looking to trade the .SPY141220C207 after the Open today, but with caution.  The Russell 2000 remains weak and with a Sell signal so all is not well today.

Thursday November 20, 2014

$SPY After Tuesday’s push to new highs, the Bulls took a breather Wednesday.  The Bulls are still in control but they are losing momentum. The Russell 2000 has seen its momentum indicators, such as MACD, Stochastic and ROC, fall into bearish territory, resulting in a Sell signal on the $RUT.  Wednesday we also saw selling among large cap momentum tech names, such as AAPL, NFLX, and BABA. Although both the DJIA and the S&P 500 put in another record Tuesday, the overall theme from the past week hasn’t changed. Stocks need some pullback or sideways consolidations.

Some interesting ideas in the following article for those seeking Thanksgiving week trading ideas.  For Black Fridaytrade that wins almost every year, think rich  

Tuesday November 18, 2014

$SPY Closed both $AGN and $ICLR Monday and closed the SPY141220C204 today.  Although the overall market was relatively quiet Monday the VIX rose 5% to 13.99, indicating there would be bigger moves in stocks prices down the road. In addition, small caps underperformed. Although the DJIA and the S&P 500 continue to make new highs, the underlying market is losing upside momentum. I will remain cautious and wait to see what the technical indicators will show us.

Saturday November 15, 2014

$SPY The major indexes continued to go sideways this past week as they consolidated their gains from the October bottom. Stocks are doing what they are supposed to do after some big gains. For the week the S & P 500 added 38 basis points to its year-to-date returns of 10.36%.  The Alpha One Model added 543 basis points over the same period.

The four major index’s which the Major Market Model tracks are rated Buy with Bullish Opinions however they all remain in overbought territory and may see further  short term pull backs. Small caps lagged again Friday which is probably one of the reasons keeping buyers on the sideline. In addition, investor sentiment is increasingly getting more bullish as all we hear in the media was how the stocks would continue to rise into year end. When there are too many bulls, much of the gain may be already been priced in.

The model portfolio is currently at 79.3% Long – 20.7% Cash, while the recommended allocation is 87.5% Long and 12.5% Cash.  I will be watching the following in the coming week for possible additions to the model portfolio, $AMAT, $FFIV, $MJN, $MMP and $ZTS while watching for an appropriate exit point for the current holding $ICLR which is longer on the master list. 

S&P 500 companies with higher global exposure reported lower earnings & sales growth.

FactSet Street Account Summary - US Weekly Recap: Dow +0.35%, S&P +0.39%, Nasdaq +1.21%, Russell +0.04%

Tuesday November 11, 2014

$SPY Yesterday I Closed $GILD and added $SWKS, $MU, $MAR, $BIDU, $EA, $LRCX and $CBG to the Apha One Model Portfolio from the current Watch List. Allocation was raised to 87.%% Long - 12.5% Cash. 

Saturday November 8, 2014

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$SPY Over the past week I both added names to the portfolio taking  my allocation close to the 50% range and traded both Calls and Puts and the $SPY for income.  The Watch list now has eighteen names on it, six of which I will be following closely in the coming week should the market trend encourage me to add additional positions, moving towards the now recommended 75% level.  Those are $CELG, $ALK, $AMGN, $CBG, $EA and  $FWRD. Given that the basis point appreciation over the past week for the S&P 500 index was 68 basis points, the appreciation for the Alpha One Model at 963 basis points should cause you to focus on why you have not yet begun to question your investment strategy.  

While both the DJIA and the S&P 500 made new records three days in a row this past week, two of the four major’s which I follow are now in both Buy mode and with a Bullish Opinion, however the analysis which I do daily on my major trading lists remains below 50% Long and the Asset Allocation Recommendation is at 75% Long – 25% Cash.

Given that every major technical indicator which is incorporated in the market model is now Bullish and all four are in overbought territory the suggestion is that the broader market is likely due for a rest. With that said, there is still sideline money chasing stocks. Any dips are likely to be bought.

U.S. equity funds, excluding ETF activity, had inflows of $323 million for the reporting period ending 11/06/14 compared to outflows of $947 million the previous week.

While the indexes that made new highs this week remained overbought, the NASDAQ and Russell 2000 deviated from the other indexes and ended the period lower. While this could be looked at as negative divergence it’s more likely a case of too far, too fast. Internal breadth numbers weren’t as robust as the previous week, but continue to improve.

The market is shifting from a ‘bad news is good news’ mode to ‘good news is good news’ status.  How the market reacts to economic data and growth going forward is going to change. We saw a hint of that on Friday when a weaker than expected jobs report initially sent stocks lower. The volatility that has been producing almost daily triple-digit moves in the Dow is probably with us for a while but pull-backs to the 50-day moving average for the major indexes will represent buying opportunities. Stocks are entering a seasonally strong period and the bull looks rejuvenated. An end of year rally looks to be in place.

Thursday November 6, 2014

$SPY Although both the DJIA and the S&P 500 are at new highs, the underlying market might not be as strong as the two indexes would have you believe.  Small and mid- cap stocks lagged again yesterday while large cap momentum names saw some selling. Overall, stocks remained overbought and we have the ECB to watch out for today.  After the Japanese announced their new QE last week, many investors expect the ECB will do something in their decision today which will drive the direction of the market.

My Asset Allocation Recommendation has again increased to 75% Long – 25% Cash and I will be watching both $FWRD and $MJN for possible entry points today.  I will most likely trade an option position again today to hedge against the uncertainties of the macro environment.  Remain cautious.

Wednesday November 5, 2014

$SPY Initiated positions from the watch list in $ALXN, $ROST and $SNA taking the holdings up to 50% Long in line with the Asset Allocation recommendation.  

Sunday November 2, 2014

$SPY The Alpha One Model Portfolio was up 380 basis points last week through Wednesday while for the full week the market as measured by the gain in the S & P 500 was up 272 basis points and it was challenging market  in many perspectives. 

There will not be much market talk tonight; the past week was very difficult for me in many ways most particularly medically.  Wednesday evening found me admitted through the local Emergency room to the hospital with Thursday filled with two successful emergency operations.  I am very grateful to the God of my understanding for his loving care in all aspects of my life.  He certainly does a much better job of running it than I ever did.

Positions were added in an attempt to keep abreast of the changing Asset Allocation Recommendations with the additions of $AGN Allergan, Inc., $GMCR, Keurig Green Mountain Inc, $KNX, Knight Transportation, and $VRX, Valeant Pharmaceuticals Intl Inc.

In the coming week in addition to $ALXN and $ROST from the prior watch list I will be focusing on $FWRD, Forward Air Corporation, $MJN Mead Johnson Nutrition CO, and $SNA, Snap-on Incorporated.

We have gotten a full Bullish list on the Alpha Market Models and the Asset Allocation has crept up to the 50% Long – 50% Cash level.  Earnings reports are encouraging and it is time to put a lid on this trading year.  The sharp rise in the past couple of weeks left behind many investors under invested. When that happens, it usually means that near term downside is limited. Any overbought pullback is likely to get bought. We are still in the “don’t fight the center bankers” market.  Be cautious but be aware.

Tuesday October 28, 2014

$SPY Remain cautious and be patient if nothing else, there are many reasons for investors to stay cautious. Technically, both the DJIA and the S&P 500 are still under their 100-day and 50-day averages and the Russell 2000 continues to underperform. On the earnings front, the strong dollar could become a headwind for many blue chip stocks. Last but not least, the FOMC decision is due out on Wednesday. Traders aren’t likely to make big bets before the minutes of this meeting are reviewed.

Yesterday we added four positions to the Alpha One Model Portfolio to bring the Long allocation in line with the model recommendations.  We added from the Watch List the following: $AGN, $GMCR, $KNX, and $VRX.

Markets more worried about EU than Ebola: Survey

Sunday October 26, 214

Over the course of the past week the overall market was able to build on the prior week’s gains as earnings season got into full swing. The rally left the S&P 500 and NASDAQ with their biggest weekly gains of the year.  In general it was a strong week all the way around with the S&P 500 higher by 4.1%, its best weekly performance for 2014. However, the S&P 500 has yet to reclaim its uptrend started in November 2012. Also small and mid-cap stocks are lagging again. So stay cautious and watch for resistance near 1967 for the S&P 500.

While I was away for a portion of last week we still did manage to add 545 basis points to the year-to-date gains in the Alpha One Model Portfolio, review the Holdings page of the spreadsheet on the portfolio for the detail.  This was done with Option trades on the S & P 500 using Call Contracts. You will note that the third trade violated my discipline by remaining on overnight.  This was a difficult decision on my part since I do not like to carry this type of exposure from session to session, however in my opinion the event that turned the market Wednesday was an aberration and I felt that earnings would continue to direct the trend upward and thusly I carried the position into the next session which when I closed the trade it ended up being a profitable one.  I do not recommend similar actions for the faint of heart.

You will note below that the Active Trader’s Model have all returned to Buy Status last week and the Watch List has begun to expand with ten names this week up from just four names at the end of the prior weekly period.  The recommended Asset Allocation range has begun to expand also, up to 37.5% Long and 63.5% Cash.  Based upon this recommendation the Alpha One Model Portfolio could add up to five more names to the holdings should this trend continue.  This being said I am still not overall Bullish since only 34.9% of the names on our lists are now Long Opinion’s.  While up some this level is still not comforting and it will require more in the way of positive earnings news to move it into a comfort zone of greater than 65%.   

Caution will remain the name of the game in the coming weeks for me as the market is likely to be on Fed watch next week with the FOMC decision due on Wednesday coupled with earnings season continuing to be in high gear.