$SPY, $STUDY The stock market proved
it again on Friday that it is a difficult place for the bears. Just when many
investors were calling for corrections after Thursday’s sell off, stocks bounced
back sharply, recouping almost all of the prior day’s losses.
The fact is, if you look at the
chart of the S&P 500, the broader market has not gone anywhere for two
months. Sector rotations have kept the S&P 500 going sideways and that
confuses many long-term investors. On sell off days like Thursday, investors
were afraid to buy, fearing that stocks would fall further. And on rally days
like Friday, they were afraid to sell, worrying about missing out the upside.
The thing is that until stocks break up or break down, we probably can’t get
too giddy or too worried. Be selective, buy stocks which have reacted well to
earnings on pullbacks and don’t be afraid to take profits on run-ups.
The Alpha One Model portfolio again
had a very nice week with the equity holdings giving up about 1% in value as
compared to the prior week and the Option Trading contributing heavily once
again to the YTD gains. While the
current portfolio holdings appear to be getting slightly long in the tooth
there is not much out there at this time to step up and replace them with. There are three fresh names on the Watch List
but given the current market status I most likely will remain where I am at for
the foreseeable future.
The conviction of the Major Market
Model has been reduced by the technical weakening of the four major’s which it
tracks. While the overall call remains 3
Buy’s and 1 Sell all four members are now caring Neutral Opinions. Couple this weakening with the downgrade to
50% Long and 50% Cash by the Asset Allocation model confirms the cautiousness
set out in the second paragraph above.
Last year I began tracking the
quarterly earnings reports last on a daily basis as they were reported. On
average each quarter of 2014 had approximately 4,015 reports with 55.7% surprising
to the upside and 54.3% surprising to the down side of analysts’ estimates.
This year the first quarter, which
remember is reflecting the closing quarter of 2014 came in at 57.6% to the
upside and 52.4% to the downside on 4,323 reports. As of April 30th we had a little
less than half the reports in and we are at 63% surprises to the upside and 37%
to the downside. To say there is a lack of understanding and/or conviction
among investors is a little mild in my opinion. Too much opinion on the part of
the media and too little fundamental analysis perhaps.
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