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.