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.