Saturday January 31, 2015

$SPY, $STUDY, January ended with a very strong overall performance in the Alpha One Model portfolio which is up 30.5% YTD.  The major portion of this gain comes from the Options trading which is undertaken as the portfolio holdings are trimmed back by the Asset Allocation model.  Options trading contributed $15,220.82 (25.4%).  However, the holdings have appreciated very nicely contributing an unrealized net gain of $3,052.91 (5%) on the beginning balance of $60,000.00.

Please note that the Alpha Master List has been refreshed and the new list posted on today’s blog along with the new Watch List.  Monday we will be closing $AGN, $ALGN, $CBG, $PZZA, and $TMO all of which are no longer on the master list.  These positions will be replaced from the watch list as the week moves forward.

Last week was truly an eventful one for investors and traders alike, finishing in a volatile fashion Friday, reflecting indecision among investors amid mixed signals from the market. Earnings were mixed as many were affected by a stronger dollar. The Fed’s latest statement released on Wednesday sounded a little hawkish, but the Fed Chair’s comment on Thursday was dovish. Consumer sentiment and confidence readings were strong but durable goods orders, as well as Q4 GDP (2.6%) were weaker than expected.

While the weak finish to January has left the market with a downbeat note going forward it is not all that bad at this juncture. After coming off the record highs reached at the end of the last year, the S&P 500 has pretty much gone sideways. Although short term volatility has been high and the risk of a correction has increased, the longer term uptrend is not broken. Of the 227 companies that have reported earnings to date for the quarter, 80% have reported actual EPS above the mean EPS estimate. Barring an unusually high number of companies reporting earnings below expectations in the second half of the earnings season, it appears likely the S&P 500 will report year-over-year growth in earnings for the quarter. Thus, the fourth quarter will likely mark the 8th consecutive quarter of year-over-year earnings growth for the index, after a year-over-year decline in Q3 2012 (-1.0%).

With no QE from the Fed, it is a stock picker’s market and so far this earnings season has demonstrated just that. Be very careful in this roller coaster market. Pullbacks will provide opportunities for stocks which have received positive reactions to their earnings.