My 5 Favorite New 52-Week Highs

With the market flat at midday there are a handful of stocks breaking out to new highs and there are five that are grabbing my attention. They are either already on my WatchList or have been added today on the breakout.

Cerner ($CERN) - Healthcare IT company that is breaking out again. I love the business model.

Ebay ($EBAY) - This stock has been on my radar due to its PayPal unit and I am looking to enter in the near future.

Ross Store ($ROST) - The discount retailer has one of the best charts in the market and based on the current and future of the consumer it should continue to be a winner.

Equinix ($EQIX) - A play on the cloud computing craze, the stock has been a huge winner. That being said, with my view that money will start to move into technology the remainder of the year, EQIX looks good on a pullback.

iShares High Dividend Equity ETF ($HDV) - Had to add an ETF on here and one that we own for some clients. The large-cap dividend stocks continue to outperform and what better way to capture it than with a low-cost ETF.

Searching for Yields - Look at Stocks Not Bonds

A chart by Bespoke Investment Group shows that 271 of the 500 stocks in the S&P 500 offer a dividend yield higher than the yield on the 10-Year Treasury.

And considering only 397 of the stocks in the index pay a dividend, it suggests 68% of all dividend paying stocks in the S&P 500 pay a higher yield than the 10-year.

When Everyone is Bearish - Time to Buy

Below is the most recent AAII Sentiment numbers. As you can see, investors have turned dramatically bearish and away from the previous bullish stance. When this happens I go against the grain and look for buying opportunities. Keep your eye out for some stock/ETF ideas in the blog later today. The AAII Investor Sentiment Survey measures the percentage of individual investors who are bullish, bearish, and neutral on the stock market for the next six months; individuals are polled from the ranks of the AAII membership on a weekly basis. Only one vote per member is accepted in each weekly voting period.
Survey Results
Sentiment Survey Results Week ending 5/9/2012 Data represents what direction members feel the stock market will be in the next 6 months.
Bullish	25.4% down 10
Neutral	32.5% down 3.6
Bearish	42.1% up 13.6
Change from last week: Bullish: -10.0 Neutral: -3.6 Bearish: +13.6 Long-Term Average: Bullish: 39% Neutral: 31% Bearish: 30%

My Fav 52-Week Highs

Today the New High list is growing as stocks tack on a 1% gain. Below is a list of some of my favorite stocks hitting highs that are either positions for PFG clients (will disclose) or stocks that are on the PFG WishList.

• Tennant Company ($TNC) - Manufactures cleaning solutions worldwide. PEG ratio of 0.99 and seeing an increase in volume on the breakout.
• Grupo Aeroportuario del Surest ($ASR) - Operates 9 airports in Southern Mexico, including Cancun. Stock breaking out of consolidation and volume has been extremely bullish. A little expensive at 2.2 PEG ratio. Pays 3.6% dividend.
• Alamo Group ($ALG) - Makes agriculture and industrial maintenance equipment. Hot sector, great chart, and a PEG ratio of 1.0 and 0.8% dividend.

Number One Reason to be Bullish - Earnings

The unofficial kickoff of earnings season was last night when Alcoa ($AA) reported better than expected numbers and helped push stocks higher today.

Even though earnings for the first quarter are not expected to show much of a gain, it is still an improvement and the number one reason I remain bullish on U.S. stocks.

Here are some numbers for you to ponder:

• In 2011 operating earnings for the S&P 500 were $96.44. At current levels the index is trading at a P/E ratio of 14.2, below the historical average of 15.5.
• The estimates are for earnings to increase to $105 in 2012, a 9% increase over last year. Based on 2012 estimates the S&P 500 is currently trading with a P/E ratio of 13.0.
• Year-over-year earnings growth numbers: 2009 +15%, 2010 +50%, 2011 +16%. The 9% increase expected is lower than the last three years and not a stretch.
• Assuming the S&P 500 achieves the earnings of $105 and the index trades at the historical P/E ratio of 15.5, the target for the S&P 500 is 1628 - a new all-time high.
• Now assume there is zero earnings growth for the year and the index is able to trade with a P/E ratio of 15.5, the target would be 1494. That is a gain of 9% from current levels and a fresh four-year high for the index.

Just for good measure I will throw in one more bullish tidbit. There have been 25 times since WWII that the S&P 500 was up both January and February. In all 25 times the index finished the year higher with an average increase of 24%. And, only 2 times did it not have at least a 10% gain for the year.

As of today the index is up 8.8%. If the index reaches the average gain of 24% it will put the S&P 500 at 1558, 18 points from the all-time high of 1576. To reach that goal the S&P 500 must rally another 14% from today's price.

Interesting New 52-Week Highs

Scanning the 52-week high list today has peaked my interest for the first time in a few days. There are a number of stocks I felt are worth mentioning.

Titan Machinery ($TITN) - Sells agriculture and construction equipment and reported blockbuster earnings. The company guided next fiscal year earnings between $2.55 and $2.75. Based on the median estimate the stock is trading with a forward P/E ratio of 12.1 even after the 15% rally today.

EPAM Systems ($EPAM) - An IT services outsourcing company that went public in early February continues to surge to new highs. The company trades with a PEG ratio of 0.67 - very attractive fundamentally and technically.

Companhia Energetica de Minas Gerais ($CIG) - The Brazilian electric utility company has one of the best charts in the country and is now reaching new highs. The 4.3% dividend is a major bonus.

Mattress Firm Holdings ($MFRM) - An operator or mattress stores the went public in November of last year. Up 20% today to a new high and is up well over 100% the close on its first day of trading. I just bought a new mattress - and they are not cheap!!

Coal Exports Surge to 1991 Highs

Exports of U.S. coal hit their highest level in over two decades as the demand from Asia and China soared. At the same time the demand for coal in the U.S. has been dropping the last several years.

Of the 107 million tons of coal that was exported, 10 million went to South Korea, an increase of 81% over last year. Japan bought 7 million tons, an increase of 119%. And India's imports jumped 65% to 4.5 million tons.

Coal's share of the U.S. power supply has fallen by over 20% in the last few years and is expected to drop once again in 2012. A major factor is increased regulation on the coal-burning industry from the green movement.

Imagine if the subsidies that the government is giving to failing solar companies went to clean burning coal? This country has so much coal, it would make sense, right? Then again it is the government.

On top of that, the environmentalists are now turning to stopping the building of ports that will allow the coal companies to increase exports. This will in turn help the coal companies and create jobs. If the U.S. does not want the coal, then let the rest of the world have it, and at least we can make some money off it.

Very perplexed here!

USDA Agriculture Estimates

The USDA came out with inventory numbers and it sees corn ending stocks unchanged from last month at 810M bushels. The Teucrium Corn ETF ($CORN) had risen the last week as investors felt the stocks would fall; the ETF is down nearly 1% in early trading.

The estimates for soybeans and wheat both fell, which could be a boost to the prices of the two commodities. However early trading is mixed on the ETFs that trade the ags.

Teucrium Soybean ETF ($SOYB) is up slightly and has rallied 20% in the last few months as the Teucrium Wheat ETF ($WEAT) is down slightly.

The more widely followed iPath Grains ETN ($JJG) is down 0.5% on the news, however long-term the ETN and grains sector is one to watch and is on the PFG WishList.

Important Facts about Market Sell-off

When analyzing a prolonged market sell-off (4 consecutive sessions heading into Tuesday) it is imperative to look at it from the big picture view.

Here are a few factors that must be considered during the current pullback.

• The four days of selling has been on decreasing volume each day. This suggests there is not an overwhelming number of sellers, but rather the buyers are taking a breather and the pullback could be healthy in the long-term.
• The S&P 500 is down 2.8% from a four-year high, not exactly a reason to give up on stocks.
• The S&P 500 remains above its 50-day moving average at 1372. This is an important indicator to watch because the index has traded above it since mid-December.
• A large number of stocks are also holding above their support levels, suggesting the pullback is healthy as of today. And not only do they not flash sell signals, many look like buying opportunities based on the high reward-to-risk setups.
  
• The small-cap stocks, as measured by the Russell 2000, are struggling. The index is down 5.5% from the recent high and was unable to break above the 2011 highs. Many believe this is a leading indicator that the "risk on" trade is back off. It could also suggest that the long-term trend of small-caps outperforming large-caps is finally ending.

Four Stocks Flashing Buy Signals

One of our many Buy Signals is the RSI Crossover Buy Signal. Today there were nearly 100 stocks that made the list and four that made it onto the coveted PFG WishList are below:

• Skyworks Solutions ($SWKS) - pulling back to support after hitting a multi-month high. Price support and the 50-day moving average are in the $26 to $27 range.

• Plains Exploration & Productions ($PXP) - Pulling back to price support at $41 after topping out at $47 in March, which was a multi-year high.

• Clean Harbors ($CLH) - Down about 8% from an all-time high in February, the stock is now trying to find support in the $64-$66 area.

• Ebay ($EBAY) - Pulling back to both price support and the 50-day moving average at $35 after touching a multi-year high at $38 - My Favorite of the group!!
  

The US versus Europe - The Winner is....

Since the start of 2011 the US start market as measured by the S&P 500 is up 12.4%.

The gain may not sound overly impressive, but considering the losses in the major European markets it should make most Americans smile.

When compared to Germany ($EWG), France ($EWQ), Italy ($EWI), and Spain ($EWP), the gains are impressive. Germany was the best of the group with a loss of 3%, while France is down 10% and Italy and Spain are down an embarrassing 22% each.

Click the chart below for a visual look of how the countries have performed.

Click for the chart.

US Corporate Bond Sales at Record

US Corporate Bond sales came in at $427 billion during the first quarter, easily beating the prior record of $397 billion set last year. Before the recent sell-off in corporate bonds the yield was at 3.4% for investment-grade, the lowest number since 1986, when the recording started.

Corporations are taking advantage of the low interest rates and borrowing money for expansion, etc. I will give the Fed credit in that by keeping interest rates low it allows for corporations to borrow at low rates, a big plus for stock performance.

The iShares Corporate Bond ETF ($LQD) is up 2% in 2012 and yields 4.24%.

The SPDR High Yield Corporate Bond ETF ($JNK) is up 3% and yields 7.28%.

VERSUS

The iShares 20+ Year Treasury Bond ETF ($TLT) that is down 6% and only yields 3.37%.

Hmmmm Corporations versus governments? I will go with LQD and JNK all day!!

Big Week for IPOs

Today 4 IPOs began trading, one day after 3 new issues entered the market.

Here are today's IPOs:

• CafePress ($PRSS) - Owns e-commerce sites where customers create, buy, and sell personalized products. Priced at $19.

• Millenial Media ($MM) - The 2nd largest mobile advertising platform in the US. Priced at $13.

• Rexnord ($RXN) - Manufactures gears, bearings, and water management products. Priced at $18.

• Merrimack Pharmaceuticals ($MACK) - Uses a network biology system to develop cancer treatments. Priced at $7.
  

China Growth Estimates Boosted

This morning Morgan Stanley upped its 2012 global growth estimates and it was fueled by a revision in China's numbers.

The firm now believes the 2012 global GDP will come in at 3.7% versus 3.5%.

China's GDP estimate is now 9.0% versus the 8.4% it had in recent months. One of the main factors behind the move is anticipated stimulus from China's government to help boost growth.

Japan's GDP was also increased to 1.8% versus 1.1%.

ETFs to Watch: iShares China ETF ($FXI), iShares Japan ETF ($EWJ), Vanguard Total World ETF ($VT)

ETF of the Day - Health Care ETF XLV

As Obamacare gets to make its way to the Supreme Court the health care stocks are not blinking an eye on they way to new highs. The SPDR Health Care ETF ($XLV) is up another 1.4% this morning and is now trading at a 5-year high.

The ETF is composed of pharmaceuticals (50%), health care providers (19%), medical equipment (16%), biotech (11%), life sciences (4%). The top 4 stocks are all drug companies ($JNJ, $PFE, $MRK, $ABT) that have been doing very well in both a risk-on and risk-off market environment.

The eventual ruling on whether Obamacare is constitutional will likely have some impact on the ETF, but any decision will have its pros and cons on the sector. What I like about $XLV is the exposure to pharmaceuticals, which are poised to continue moving higher, as well as the 2% dividend yield. Throw in the bullish chart and $XLV looks like a winner.

Gas Prices Become Troublesome - Make Money From It

The chart shows the price of gas during the week of March 12 and as you can see this year it is higher than it has been the last 17 years. There are several comparisons we can make to determine if the price of gasoline is affecting the economy and the consumer. But this chart tells the story because it compares the same week every year. Wait until the summer driving season is here and get ready for $4 is not much higher gasoline.

Then there are the outside factors such as Iran that could catapult gasoline higher. But a bigger concern should be an increase in demand. If the economy continues to improve, demand will increase and therefore so will the price. That is until it gets to an unsustainable price!!

Investors can look to stocks and ETFs to play higher gas prices. The most direct play is the US Gasoline ETF ($UGA) that tracks the front month gasoline futures. The ETF is trading at its best level in over three years and could see higher prices with the current environment setup for the trend to continue.

Market Surges on Stress Tests

With an hour left in trading the news that JPMorgan Chase ($JPM) has passed the stress test and plans to hike its dividend and buy back shares sent the market soaring. Since that time we have found out all but 4 of the banks passed the stress tests. This sent the SPDR Financial ETF ($XLF) up 3.8% today to the best level since July 2011.

The news sent $JPM higher by 7% for the session. I am smiling as I type this as $JPM is one of the firms bigger positions. It is nice to see patience pay off and the gains begin to pile up. I expect this strength to carry over into tomorrow and could be enough to help the market continue its current bull market. The S&P 500 is now up 11% for the year.

With that being said, I do have a bit of caution for investors that are only now deciding it is time to get back into stocks. I do not want to say you are too late, but the reward-to-risk situation is not as attractive as it was three months ago. We have been doing some buying and selling since the year began to position for this rally. My prediction for the S&P 500 was in the 1500 to 1550 range for the mid-year high. Today the index closed at 1395, that leaves another 9% on the upside at the mid-range of the prediction.

The support for the index is about 5% below the current price and therefore the reward-to-risk is 9-to-5, not the ideal setup for getting back into the market. A pullback to the low to mid 1300's would be much more attractive for new money. We will continue to pick individual stocks/ETFs that offer better setups and could participate in a rally to 1550.

I will share one such ETF with you. The iShares Realty Majors Index ETF ($ICF) invests in a basket of REITs and broke out of a consolidation pattern today. There is strong support at the $74-$75 area and it closed today at $76.06. The dividend yield is 2.8%.

Random 52-Week Highs

The list of stocks/ETFs hitting new highs is growing as the major indices break out to multi-year highs. What I find interesting is that not only are the popular names breaking out, but so are some of the lesser-known stocks and ETFs. Here are a few that may surprise investors.

• PowerShares Emerging Markets Sovereign Debt ETF ($PCY) - The basket of emerging market debt has surged straight higher after bottoming in early January. Along with the ETF breakout out to new highs, it pays a 5.2% dividend.
• Target Corp ($TGT) - The discount retailer typically does well during slow growth environments and when the risk-on trade is off. However this time around the retailer is enjoying success as it hits a new high today.
• Brookfield Infrastructure Partners ($BIP) - The company owns and operates various infrastructure properties around the globe. They include shipping terminals, LNG production facilities, etc. With the global economy still not at high growth levels it may be surprising this company is doing so well. It also pays a 4.8% dividend.

** My firm owns shares for all three mentioned for some of our clients.

Fighting Inflation with Gold

My weekly op-ed in the International Business Times.

Gold and Inflation

Click here for the article.

Overseas ETF Update - UK, Russia, Brazil

Weak UK Economic Numbers

The UK Retail Sales figure for February fell by 0.3% year-over-year after falling by the same percentage in January. The drop in January was the worst for that month in 17 years and the inability to rebound last month is not a good signal for the consumer. House prices in the country fell by 0.5% in February and down 1.9% year-over-year. This is the third consecutive monthly decline. Mortgage rates on the rise are hurting the UK market, something the US market has yet to deal with.

** iShares United Kingdom ETF ($EWU) up 8.3% in 2012

Brazil GDP Misses

The final 2011 GDP number for Brazil came in at a growth rate of 2.7%, which is below the forecast of 3% and well off the goal set at the beginning of 2011. Expect more interest rate cuts in the coming months to help spur on bigger growth in the country.

** iShares Brazil ETF ($EWZ) up 20.2% in 2012

Russia Riots

More protests in Russia have the country’s stock index falling today, one day after a rally based on a landslide Putin victory. There is not surprise that protests have suggested vote tampering and therefore stocks fall with the Micex Index down over 2.5% today.

** Market Vectors Russia ETF ($RSX) up 24.3% in 2012