Monday, October 31, 2011

Market Wrap - Do Not Give Up

Do Not Give Up


The selling today should not come as a surprise to anyone that regularly reads this blog or to anyone that is realistic when it comes to investing. After a 20% rally from the low on 10/4 through the high of last week, it would be unrealistic to believe that stocks were not due for a pullback at some point this week.


Even though the selling was exasperated late in the day, this is no reason to give up on stocks completely and throw in the towel. I believe the S&P 500 will find support in the 1230-1250 area and at the point investors can begin to scale into new positions. Due to the large number of hedge funds and individual investors that are out of the market at this time, all weakness should be met with some buying. This is the biggest factor as to why stocks should find support by the end of the week.


Still a Record Month


Even after a wave of selling overtook the markets today, the month of October is one of the best on record. The S&P 500 will close with its best month since 1987 and the Dow has its best month since 1982.


In the months following the January 1987 rally the S&P continued to move higher as did the Dow after its October 1982 surge. Based on history, big months have been the start of a rally that lasts a few more months. Just one more reason to look at the pullbacks as opportunities to buy at discounted prices.


ETFs for the Nervous Investor


If you disagree with me and feel the market will continue lower or if you would like to hedge your portfolio you must read this short article I wrote last week. It includes a few ETFs that will protect your portfolio during another pullback. The four ETFs were up on average 1.6% today.


Here is the link:

http://stocks.investopedia.com/stock-analysis/2011/ETFs-to-Hedge-Another-Sell-Off-HDGE-SH-FXY-TLT1024.aspx#axzz1cO2fHJwW

Low-End Retailers Showing Strength

Last week a set of economic numbers pointed to consumers spending more than anticipated and at the same time they are saving less. This sounds like someone else I know - The US Government.

I do not agree with this strategy, however from the viewpoint of making money in the stock market it does suggest the holiday season will be a good one and why not look at the retail stocks.

Today some of the l0wer-end retailers are holding up well and showing relative strength versus the overall market. Here are a few:

  • Big Lots ($BIG) is up 1.5% and holding support at $36 after the recent breakout.
  • Ross Stores ($ROST) is up 1.3% and has been mentioned several times in my blog as a favorite retailer of mine.
  • Family Dollar Stores ($FDO) is up 1.7% and has been a leader in the bargain shopping sector.
  • Bed Bath & Beyond ($BBBY) is up 1.1% and was my stock pick of the week on Fox News Channel's "Bulls & Bears" this past weekend.

What to Do With Stocks Now!!

After a 20% rally from the low on 10/4 through last week's high there is no doubt in my mind that stocks are WAY overdue for a breather. This pullback appears to have begun this morning with the major indices down 1.25%.

The S&P 500 will likely fall back into the old resistance area (1230 - 1250) this week and at that point should attract more buyers.

The keys are to be patient when looking to establish new positions, look for support on the market and individual stocks, and do not be timid when a stock hits your buy area.

For reasons I will detail in a blog post later today, I feel the market is poised for higher prices into the end of the year. BUT, that does not eliminate volatility that will create wild daily swings and buying opportunities for patient investors.

Friday, October 28, 2011

Bear Market to Bull Market in 3 Weeks

On October 4th, just over 3 weeks ago the headlines were touting a new Bear Market after the US markets fell at least 20% from their recent highs. That day happened to mark a 52-week low for stocks and since that time the S&P 500 has rallied 20% to a new multi-month high.


The poor, uneducated investors that decided to sell stocks after the headlines grabbed the attention of the media are now pacing and trying to figure out how to get back into the market.


This is just one more reason I always suggest individual investors stay away from attempting to “time the market”. Sure it is doable, but leave that up to people like me that look at the charts 24/7 and let us do our job. Granted I will be wrong, but the key is to remove emotions and use the research we have to make educated decisions – NOT Emotional Decisions.


The Big Question now is whether it is time to Buy into the current rally or Sell into the strength.


My answer is a little bit of both. I can guarantee investors are sitting on stocks/ETFs they have wanted to sell for weeks and were looking for a bounce. Well here is your bounce!!


If you are not comfortable with a position, sell into the rally. OR place a stop-loss a few percentage points below the current price in the event the stock begins to fall. This will allow for a higher sell price if the market rally continues.


Investors that are under invested can now look to stocks on their WatchList and use any type of pullback in the next week as an opportunity to play what I feel could be a year-end rally that takes stocks higher. The key is buying on weakness and Do Not Chase now and panic that you missed the entire rally.

Wednesday, October 26, 2011

US Dollar Set to Rally

The US Dollar Index has fallen nearly 5% in the last three weeks as the stock market has rallied and money has moved out of the safe-haven currency into the Euro and other foreign currencies.

There has yet to be a resolution out of Europe and as speculation that a big deal will not get done the stock market rally has faded and the US Dollar has found support. If the news is not very good out of Europe in regards to a Greece bailout I expect stocks to fall after hitting resistance and the Greenback will rally.

To play such a rally in the US Dollar there is the PowerShares US Dollar Index Bullish ETF ($UUP) that moves in tandem with the index. The ETF is attempting to make a short-term bottom today.

For the more aggressive trader there is the ProShares UltraShort Euro ETF ($EUO) which is double the inverse daily move of the Euro. So as the US Dollar rises the Euro will likely fall.

** All leveraged ETFs are very aggressive in nature.

Tuesday, October 25, 2011

Gold attempting major Breakout


The shares of the SPDR Gold ETF ($GLD) are attempting a major breakout today after the news out of Europe sent investors out of currencies and into the safe-haven/currency alternative.

The chart below shows $GLD currently trading above resistance at $163.25. A close above this level will be the first step in gold starting a new sustainable uptrend. I will update you on the close.

Monday, October 24, 2011

3 ETF Ideas from Fox Business Today

Here are my 3 ETF Picks this week on Fox News Live.

(Every Monday at 1pm ET Matt shares his thoughts on the market for the week and his top 3 investment ideas.)

Vanguard Information Technology ETF ($VGT) – Made up of over 400 tech stocks with the big names as the top holdings: Apple, IBM, MSFT, Google, Oracle. Low expense ratio of 0.24%.


Global X Fertilizers/Potash ETF ($SOIL) – Basket of companies involved with supplying farmers with fertilizers and Potash. Top holdings include CF Industries, SQM, POT, IPI, SYT.


SPDR S&P Retail ETF ($XRT) – With the holiday season around the corner the retail ETF is outperforming. Top Holdings include Sears, Charming Shoppes, Aeropostale, Blue Nile, etc.


**PFG owns shares of $SOIL for clients.

Major Takeover in Cloud Computing

HEADLINE: Oracle ($ORCL) will purchase RightNow Technologies ($RNOW) for $43/share, about a 20% premium to the stock's Friday close.

The $43/share price is an all-time high for $RNOW - a stock that was my top pick in 2010 via a Seeking Alpha interview. You can read the interview here:
http://seekingalpha.com/article/186217-why-cloud-computing-provider-rightnow-is-this-fund-manager-s-highest-conviction-holding

The Cloud Computing sector continues to be my favorite within the Technology industry. There are a few ways to play this long-term move to the cloud.
  • First Trust ISE Cloud Computing ETF ($SKYY)
  • NetSuite ($N)
  • Amazon.com ($AMZN)
  • Teredata ($TDC)

Industrial Metals Lead Rally

Just last week the price of copper was hitting yearly lows and the bears were suggesting that was a sure fire sign of a new recession around the corner. Yes, copper could be a good indicator, however I do not feel the sell-off this time was foreseeing the future.

In the last two trading sessions the iPath Copper ETN ($JJC) is up nearly 10% from the closing low on Thursday. The ETN is currently trading at $43.66; a close above $44.50 would be a significant breakout.

The PowerShares Base Metals ETF ($DBB), which PFG has owned for years, is up 7.25% since Thursday. The ETF is composed of copper, aluminum, and zinc futures contracts.

The iPath Aluminum ETN symbol is $JJU. It does not trade much and typically follows the movement of copper and the other base metals.

Watch $JJC closely this week to see if a breakout occurs or if the rally is simply an oversold snap back.

Thursday, October 20, 2011

Tobacco Stock with growth and high dividend

Investors have been searching for high dividend yields and “safety” stocks during this volatile market environment. One stock we have some exposure to is Philip Morris International ($PM), the producer of tobacco products outside the US.


Not only is tobacco one of the sectors that tends to do well regardless of the economic environment, PM also pays a 4.6% dividend.


The company reported earnings today and the stock is shooting up over 3% on the news. Net income rose by 31% to $2.38 billion as it sold more cigarettes at a higher price.


Asia was the growth story for PM where shipments were up 13%. This helped offset lower shipments to the EU, Latin America, and Canada. The volatile and undeveloped areas of Eastern Europe, Africa, and the Middle East saw shipments increase. The bottomline is that PM is able to cut costs so even if shipments fall in certain regions the net income grows.

Wednesday, October 19, 2011

High Yielding MLP Investments

Investors in search of big dividends that come with exposure to a sector they believe in need not look any more.


A sector I have been touting for years and that I have exposure to for clients through a variety of ETFs and stocks is the master limited partnerships (MLPs).


There are a variety of ETF/ETN/closed-end funds available to investors. We currently own two such vehicles for clients. The Fiduciary/Claymore MLP Opportunity Fund ($FMO) was bought years ago before any MLP ETN/ETF was available. The fund has been a big winner for us and currently pays a dividend of 7.2%.


We also have exposure to the JPMorgan Alerian MLP ETN ($AMJ), which pays a dividend of 5.3%.


If I were looking to buy now there are other options for investors such as the Alerian MLP ETF ($AMLP). The ETF is made up of 25 MLPs that concentrate on the energy sector, just as nearly all MLPs traded in the US do. The current dividend is about 6.4% based on the last 12 months. The expense ratio is 0.85%.


Top Holdings in $AMLP are: Kinder Morgan Energy Partners ($KMP), Enterprise Products Partners ($EPD), and Magellan Midstream Partners ($MMP).


Keep in mind there was a merger earlier this week involving Kinder Morgan and I expect more mergers in the energy pipeline sector, which is good for the MLPs.


If you want more individual MLP names for investing ideas go to this link for the 25 that make up $AMLP:


http://www.alerianmlp.com/holdings.php

Utility Stocks Hitting New Highs

The SPDR Utilities ETF ($XLU) is on pace to close at the best level in 3 years if it holds its early gains. The ETF is up 10% year-to-date and has been as steady as any of the sector ETFs.

The bonus is the 4% dividend the ETF is currently paying.

Some other utility stocks having a good year include

  • Southern Company ($SO)
  • American Electric Power ($AEP)
  • Consolidated Edison ($ED)
  • Nisource ($NI)
  • Nicor ($GAS)

Tuesday, October 18, 2011

Stocks at PIVOTAL Level

The $SPY are at a VERY critical level heading into earnings from $INTC and $AAPL tonight after the bell.

The intraday high of $123.50 is exactly one penny from the 2011 post-crash high of $123.51 that was hit on 8/31/11.

The upper horizontal black line shows the resistance level and will be the area that the $SPY must close above for a confirmed breakout. A failure to breakout this week could lead to a 5% pullback in the overall market.

An Hourly Look at the Market


The above chart is an hourly chart of the SPDR S&P 500 ETF ($SPY) dating back to the beginning of September. The two horizontal white lines show the support and resistance for the index with the recent rally putting the $SPY up against a level that will prove to be tough to break through.

The $122.60 area is resistance and until a confirmed breakout is signaled, the market will likely continue in the trading range for the foreseeable future.

China Growth Slows - Now a BARGAIN

The headline harps on the slowing growth of China, when in reality the country is still a rock star as far as growth. The country’s Q3 GDP rose 9.1% Y/Y. This is troubling to some because it is down from 9.5% in Q2. The quarter marks the slowest growth since 2009 and many now believe the issues in Europe are spilling over to the Asian region.


I have no doubt the Eurozone issues are affecting all regions around the world, but to say it will be the end of the growth story in China is ridiculous. Even if growth comes in between 8.5% and 9.5% for the next 2 years, China remains the engine that is powering the world.


Based on the P/E ratio of 7.1 that China currently carries it is clear the numbers are pointing to bargain prices today. Even though the shares are cheap, they can always get cheaper and I would suggest slowing building a position in the country and the region.


ETFs that give investors exposure to China include the iShares FTSE Xinhua 25 ETF ($FXI), SPDR S&P China ETF ($GXC), and a slew of Chinese sector ETFs from Global X Funds.

Bank Earnings Mark Bottom in Sector

Two big financials reported quarterly earnings today that open up more questions about the sector. Bank of America ($BAC) easily beat estimates for net income and revenue, however the big number was aided by one-time gains in sales of assets.


Goldman Sachs ($GS) on the other hand reported net income that came in well below estimates and their first loss since 2008 AND only their 2nd loss ever since it became a public company.


Both stocks recently moved into the green in pre-market trading, well off the early morning lows as buyers are stepping in to buy. I would not be surprised if the two stocks are able to close with gains today (a lot depends on news out of Europe) because in my opinion the bad news has already been priced into the stocks.


The SPDRs Financial ETF ($XLF) will be one to watch as the day unfolds. A close above $13.25 in the next week would be very bullish for the sector and the market.

Wednesday, October 12, 2011

Stock Rally is Ending

The market closed with modest gains and traded at the best level since 9/1. The move from the low of last week to the intraday high today hit 13.6%. That is an amazing run after the headlines read, "US Stocks in a Bear Market".

Two lessons from this.

1) Do not invest based on the headlines, this is old news and will only have you chasing performance or selling too late.

2) After a 13.6% gain in such a short period off a 52-week low do not chase now. There will be a normal pullback even if the bottom was put in place last week. Patience is a virtue right now.

The S&P 500 hit a high of 1220 today, only 10 points away from significant resistance from from the last day of August. I feel the market is overbought in the short-term and will struggle to get past the resistance area. However, if a big news item out of Europe goes in the favor of the bulls the market will power right through resistance. This is what makes the market so difficult these days. The unknown news can push stocks heavily in one direction or the other.

Right now if you have stocks you have been wanting to sell, now is the time to lighten up and raise cash after the recent rally. Also if you are in the camp that the market has yet to see the lows, now would be the time to enter your hedging positions, whether that is a short ETF or another hedge - do it now!!

Currency ETFs for Weak Dollar

Over the last week the Euro has rallied approximately 5% and the Aussie Dollar is up 7% as the US Dollar falls from an 8-month high. The fall in the greenback is directly correlated to the move up in stocks as the risk-trade is back on and money is leaving the perceived safe-haven US Dollar.

My long-term view on the US Dollar is that it will continue the trend lower as stocks rise and as the government needs the currency low to increase exports. To play a weak greenback there is the PowerShares US Dollar Bearish ETF ($UDN).

There is also a variety of foreign currency ETFs. The Aussie Dollar is $FXA and Euro is $FXE.

Investors looking to invest in a basket of foreign currencies that focus on the emerging markets could consider the Wisdom Tree Emerging Currency ETF ($CEW). The ETF has rallied recently with the drop in the US Dollar.

Monday, October 10, 2011

Risk Trade Back On & Ignoring the News

The risk-on trade continued today as the two leading sectors were the Financials ($XLF) and the Materials ($XLB). Both ETFs closed at the best level in several weeks as the fears of a European collapse and a global recession were subdued.


What I find interesting is that nothing and I repeat NOTHING has changed in the last six days when the markets were all hitting new 52-week lows and the world felt as if it was going to end.


That same day (last Tuesday) the US market moved into “bear market” territory with a drop of 20% from its high. Ironically as the headlines pointed out the bear market the $SPY rallied 11% from the intraday low to today’s close.


The point I am trying to make is that one day the situation is dire, the next day the economy will get through this and is improving. Nobody knows what the future holds from day-to-day, but what we can do is use what information we know (not what we want to know) and base our investment decisions on it.


As of today I continue to feel the economy will avoid a recession while it grows at a slow pace for a year or two. This will be good enough for many companies to continue reporting strong earnings and with a recession priced into stocks, now is still the time to have exposure to the market in your portfolio.


I had several clients that wanted to exit the market completely last week and some did. My company is here to guide clients to meet their long-term investment goals with appropriate risk and more importantly help individual investors from hurting themselves. Not that we are always correct in our calls, because we are not, but we do our best to remove emotions from the equation.


By selling everything and giving up on the market yesterday an investor let his emotions get the best of him. And the likely outcome will result in entering the market at a much higher price. This is just one more reason the individual investor struggles to beat the market.

Three New Highs to Watch

Three Interesting New Highs:


Rightnow Technologies ($RNOW) has been one of our favorite Cloud Computing stocks since late 2009 and in the last month it has put together an impressive rally to a new all-time high. A pullback to the $34-$35 range will be tough to ignore.


Activision Blizzard ($ATVI) is a gaming company that has been stuck in a trading range for three years. A big surge today has the stock at its best level in two years and on the verge of a much bigger breakout. This is one to watch.


Dollar Tree Stores ($DLTR) hitting yet another all-time high today and is up 41% on the year. The move today is somewhat of a surprise because with stocks bouncing on hopes of a better economy in the future, $DLTR typically will outperform during a recession.

Thursday, October 6, 2011

Europe and Jobs x2

The early morning market action is being driven by news out of Europe and a double-dose of Jobs.

First of all, my condolences to the Steve Jobs family. What a great innovator of our time. The death of the savior of Apple has Wall Street mourning and the stock off slightly. We own shares of $AAPL for clients and will continue to hold as I feel the departure of Jobs earlier this year has already priced in his absence.

The other jobs moving the markets is the weekly jobless claims that came in better than expected. This gave stocks a small boost pre-market and could be good news heading into tomorrow's very important monthly employment report.

Europe again at the top of the headlines. The rumors of the EU coming together to restabilize the banks was a positive, but the lack of a rate cut by the ECB was negative. The two stories coupled with the Jobs' headlines have the market little changed from last night.

It will be interesting today to see if the recent rally can continue. My first thought is that another big move higher could be in the works if the news out of Europe related to their banks is positive. On the other hand I am leaning towards one more big down draft in the overall market in the next couple of weeks.

Buckle Up!

Wednesday, October 5, 2011

The Close Depends on Europe

The market continued its late-day rally this morning and after a lunch hour sell-off is back near the highs of the session. Today's early morning rally was sparked by more positive news/rumors out of Europe as well as better than expected economic numbers.

The ISM Services number and the ADP Job report both came in with readings above estimates. The fading of the rally at lunch can be attributed to investors selling into the rally as well as new rumors out of Europe that Greece is still a high-risk default candidate.

As important as the economic numbers are for the stock market in the long-term, the daily movements will continue to rely on the European situation. In the next 2.5 hours look for the market to take its cues from Europe and if there is no breaking news, stocks should end with sizable gains.

Top performing sector ETFs today:
  • SPDR Materials ETF ($XLB)
  • SPDR Technology ETF ($XLK)
  • SPDR Industrial ETF ($XLI)
Top S&P 500 Stocks today:
  • Marathon Petroleum Corp ($MPC)
  • Tesoro ($TSO)
  • Juniper Networks ($JNPR)

Tuesday, October 4, 2011

Market Recap - Now What?

With less than an hour left in trading the Dow was down 250 points and it appeared the closing well was going to mark a new 13-month low for stocks. But just as a new low would not have surprised me, either did the 45-minute rally to end the session. The nearly 400-point rally (yes that is a "4") enough to turn an ugly chart into a setup for a potential dead cat bounce into the end of the week.

The rally was fueled by yet more rumors out of Europe that the EU is discussing recapitalizing the banks. The SPDR Financial ETF ($XLF) closed up 4% after being down as much as 3% when it was trading at a 2-year low. Morgan Stanley ($MS) led the way with a gain of 12%.

Other risk sectors such as the Materials ($XLB) up 3.8% and Consumer Discretionary ($XLY) up 3.2% benefited from the news. The Utilities ($XLU) lagged with a loss of 0.4%, but still are within 5% of closing at a new 3-year high. The rotation out of utilities into the beat down sectors was not a big surprise.

The big question - what to do now??

I will continue to sit on my hands for another day or so and analyze the action based on the news/rumors. Because of the large amount of short sellers and bears in the market if the news remains positive overnight you can expect the rally to continue tomorrow. On the other hand if the news turns out to be nothing new, the selling should resume.

So basically I am keeping the same strategy that include fine-tuning out WatchList of stocks/ETFs so when it is time to buy we are ready to pounce.

Bear Market = Buying Opportunity

The S&P 500 moved into Bear Market territory today officially by dropping 20% from its high set in late April. Even though the move is great for headlines it is not a significant moment for me. Whether the index is down 18% or 25%, either way it hurts.

At one point this morning the S&P 500 was down another 25 point before rallying back to move into the green during the lunch hour. It was another crazy day for stocks and we still have 3.5 hours remaining. It is truly anyone's guess as to where the market closes, but I will guarantee that there will be some wild swings before the closing bell rings.

So a buying opportunity? Yes it may sound crazy to use the word buy on the same day the market goes into a bear market. But then again I was never conventional and when has conventional made money in the stock market??

Here are a few stocks/ETFs that have been hammered and are now becoming hard to not buy at such discount prices.

(BUT AS I ALWAYS SAY, STOCKS ARE CHEAP - BUT THEY CAN GET CHEAPER!!)

SPDR High Yield Bond ETF (JNK) - Yep, a corporate bond ETF makes this list. JNK yields 9% and has been absolutely hammered recently. Down 8% in the last three weeks as investors fear the bonds in the ETF will default. As long as they make their interest payments we are all good. And with a large basket of bonds in the ETF the company-specific risk is removed. **Disclosure: PFG does own JNK for clients.

Applied Materials (AMAT) - The semi equipment company broke support yesterday at $10, but attempting to regain it today. With a 3.1% dividend and a PEG ratio down to 0.87. A value, income, and potentially growth play all in one.

Arcelor Mittal (MT) - The steel company broke to the lowest level in 7 years and is now trying to build a base at the $15 area. With a dividend of 4% and a PEG of 0.29 the stock is a screaming value buy. BUT, it was a value at $20. So be careful when considering this aggressive stock.

Monday, October 3, 2011

BNN Appearance Monday Morning

Below is a link to my Monday Morning Market Update with Canada's BNN (Business News Network).

http://watch.bnn.ca/business-day/october-2011/business-day-october-3-2011/#clip542881

SP500 Chart with Support Level

The S&P 500 is once again testing the support level, which is the bottom of the current trading range. The lower green line (support) is at 1120 and that represents where the index closed on 8/8/11. A close below 1120 would be a negative technical signal for the near-term movement of the index.

As always, you must wait for close for confirmation. The index broke down below the line in the past, only to rally the next few days. Today's action in the next 5 hours will be crucial for the remainder of the week's action.

Early Rebound on ISM Number

After opening lower and at one point logging a 1% loss, the US indices turned things around after the 10am release of the ISM Manufacturing number, which came in better than expected.

The reading of 51.6 beat expectations and was better than the 50.6 number in August. The surprising number sent stock higher initially, but of course the buying waned within the next 20 minutes.

The report showed activity in the manufacturing sector expanded for the 26th consecutive month (reading above 50) and the overall economy grew for the 28th consecutive month.

This may not be enough to turn around the market, but in combination with a better than expected Construction Spending number it could be enough to hold the market up from any big selling to begin the new week and quarter.

BIGGEST GAINERS on the S&P 500 at 10:25 --
  1. Yahoo (YHOO)
  2. Netflix (NFLX)
  3. Zions Bancorp (ZION)
  4. Newmont Mining (NEM)
  5. CF Industries (CF)