$SPY, $STUDY, Again we enjoyed a very profitable week with the
Alpha One model portfolio, both through equity appreciation and our day trading
activities with the SPY contracts. The
portfolio holdings are beginning to show signs of weakening but none of the
Sell rules have yet been triggered so we will continue to hold adhering to the
discipline. The day trading is working
well with four profitable trades last week.
I continue to be a little uncomfortable with the market but not yet
bearish. My concerns remain focused on
the unrest which is beginning to percolate through on the labor front and the
nagging question as to the degree to which corporations can continue to push on
cost restraints to bolster earnings. I am beginning to believe that the day is
nearer than most think. No changes to
report on either the Major Market Model or the Allocation ranges at this time.
The overall market was mixed Friday, the price surge in AMZN,
along with strong post-earnings gains by GOOGL, MSFT, JNPR and SBUX, sent the NASDAQ
to another record. Gains in MSFT kept the DJIA in the green in the end. The
blue chip index closed with a 21.45 point (+0.12%) gain at 18080.14. However,
the overall market wasn’t partying like those big tech stocks. Energy,
industrial and financial stocks pulled back ahead of the weekend while small
and mid-cap stocks underperformed.
While AMZN, GOOG, MSFT and etc. made the headlines Friday, many
semiconductor stocks did poorly. The semiconductor sector tends to lead the
economy. So we have to question how strong the economy really is. Is it
possible for the economy to grow on the “soft” stuff in a long run, such as
cloud and social networks? That also brings the question how big/how high the
stock price of AAPL can get. On the “hard” side, sooner or later growth of the
iPhone will slow while the potential of Apple Watch is yet to be seen. So the
long term performance of the stock is likely to rely on the “soft” stuff, such
as Apple Pay, iTune, video and etc. But how much will those “soft” things help
stimulate the overall economy?
All eyes will be on AAPL earnings on Monday. Its post earnings
price moves is likely to have significant effect on all three major indexes.
Overall, it continues to be a stock picker’s market. And besides AAPL earnings,
next week is setting up to be a busy one. Q1 advance GDP is due out on
Wednesday and on the same day, the FOMC will announce its latest rate decision.
Our friends at FactSet put out an interesting piece on earnings
which begs the question, “How much longer can earnings growth be sustained by
cost cutting?” If in fact Revenue numbers continue to grow while earnings decline
we may have already missed the boat.
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