$SPY, $STUDY, The uptick
jobs report (nonfarm payrolls +223K with unemployment rate at 5.4%) set off a
big rally in the stock market Friday, wiping off all the losses from earlier in
the week. The number of job gains suggested that our economy was growing while
it was not too hot to cause the Fed to hike rates in June.
It was only two days ago when the media was dominated by some
investors calling for a bear market. Now the S&P 500 is back within 2
points of its record close. The question now is whether Friday’s surprisingly
large rally can last. Short term momentum readings, which turned bullish Friday,
suggest that we should get a follow-through. However, with all four major
indexes back nearly at the top of the ranges they have been stuck in for over
two months, stocks are likely to run into some resistance. With that said,
there is still too much doubt among investors that this market could go higher.
I sold Dollar Tree (DLTR) this week when the recommendation when
to Sell, there is another name in the portfolio which is also nearing a sell
signal and that is ICLN PLC (ICLR).
There was not an offsetting purchase for the DLTR sale. Even though the
equity markets are close to all-time highs the technical condition of the
markets continues to deteriorate. The
overall Asset Allocation recommendation remains at 50% long and 50% cash which
is supported by the declining number of long recommendations which are
generated by the daily analysis of the six watch lists from which names are
chosen. All-time highs with weakening
fundamentals is not a time to go long.
And why would we, the weighted return year-to-date for the
combined Alpha One Model and the Alpha Two model is 42.6%. Again most of the gain comes from the daily
option trading but none the less the Alpha Two model is up 4.8% and the equity
only gain is 11.44%. Those two averaged
would be up 8.12% while the S & P 500 is up 2.8%. I will continue to day trade options and
watch with caution for the next buy move.
Earning season is about half over with about 75% of the companies
reporting thus far with the positive surprise number holding at about 60% of
total.
With such middle of the road reading on investor sentiment,
coupled with a lack of imminent negatives on both the fundamental and technical
fronts, suggests that the path of least resistance is to the upside for the foreseeable
future. Remain cautious and resist
paying too much attention to the media bobble heads.
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