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