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.