If you’re a long-time reader of StreetAuthority, you know by now that we rarely recommend stocks with yields higher than 10%. If the yield is higher than that, it’s usually a sign that the company’s fundamentals are sagging, investors are bracing for a dividend cut — or worse… But today, I’m going to show you how to break one of the cardinal rules of safe income investing and buy a stock yielding 17% without losing a single night’s sleep. #-ad_banner-#All you have to do is think more like a trader. Now, I know that doesn’t come easy to most income… Read More

If you’re a long-time reader of StreetAuthority, you know by now that we rarely recommend stocks with yields higher than 10%. If the yield is higher than that, it’s usually a sign that the company’s fundamentals are sagging, investors are bracing for a dividend cut — or worse… But today, I’m going to show you how to break one of the cardinal rules of safe income investing and buy a stock yielding 17% without losing a single night’s sleep. #-ad_banner-#All you have to do is think more like a trader. Now, I know that doesn’t come easy to most income investors, but it’s easier than it sounds. In fact, I’m going to show you how one simple tool allows you to know when it’s safe to buy stocks with ridiculously high yields, hold them for a period of time and collect any dividends you might receive, and then know when it’s time to get out before the rest of the crowd loses their shirts. But it’s one thing to tell you this. I want to prove it to you with one of the most followed high-yield mortgage real estate investment trusts (mREITs) of the past few years — American Capital… Read More

The stock market saw little volatility last week, but pushed below a key support level. Now is a time to become cautious. Consolidation Could Be Giving Way to a Small Decline SPDR S&P 500 (NYSE: SPY) closed down for the second week in a row. SPY fell 1.56% as the market continued to consolidate its gains after an eight-week winning streak.#-ad_banner-#​ Traders understand that markets move up and down over time. On a long-term chart, we often see a recurring pattern of price rises followed by pullbacks. Pullbacks are healthy for a bull market because… Read More

The stock market saw little volatility last week, but pushed below a key support level. Now is a time to become cautious. Consolidation Could Be Giving Way to a Small Decline SPDR S&P 500 (NYSE: SPY) closed down for the second week in a row. SPY fell 1.56% as the market continued to consolidate its gains after an eight-week winning streak.#-ad_banner-#​ Traders understand that markets move up and down over time. On a long-term chart, we often see a recurring pattern of price rises followed by pullbacks. Pullbacks are healthy for a bull market because they allow the fundamentals to catch up to the price action. Since the purpose of a pullback in a bull market is to allow time for fundamentals to catch up to prices, a consolidation can substitute for a price decline. A consolidation is a period of time when prices make little progress to either the upside or the downside. Consolidations can be boring times for many traders, but we could be about to enter a more exciting time. After a one-month period of little price progress on the daily chart, we could be seeing a breakout to the downside. Read More

If you ask most people, they will say there are two types of people that put money in the stock market. There are “investors” — those who put money to work in fundamentally sound companies for the long term. Then there are “traders” — those who buy stocks for a short-term gain, without much concern for the actual business. #-ad_banner-#The reality isn’t as clear cut. You see, if you aren’t using the principles of both investing and trading, then I think you’re limiting your returns and increasing your losses. But it’s one thing to tell you this. I want to… Read More

If you ask most people, they will say there are two types of people that put money in the stock market. There are “investors” — those who put money to work in fundamentally sound companies for the long term. Then there are “traders” — those who buy stocks for a short-term gain, without much concern for the actual business. #-ad_banner-#The reality isn’t as clear cut. You see, if you aren’t using the principles of both investing and trading, then I think you’re limiting your returns and increasing your losses. But it’s one thing to tell you this. I want to prove it to you with one of the most widely-followed stocks of the past decade — Apple (Nasdaq: AAPL). You’re no doubt familiar with Apple. You might have even owned some shares at some point. Maybe you still do. Apple is one of the most fundamentally sound companies on the planet. For years, the popularity of iPods, iPhones and its computers caused earnings and cash flow to soar. Since 2003, the company’s annual revenue has risen from $6.2 billion to $170.9 billion. Meanwhile, until very recently, Apple carried no debt. Instead, it boasts a $145 billion cash pile. That’s enough… Read More

A strong gain after Friday’s jobs report failed to reverse four days of losses, and stocks were unable to deliver their ninth consecutive weekly gain. A Pullback Continues to be Likely After eight weeks of consecutive gains, SPDR S&P 500 ETF (NYSE: SPY) closed down 0.03% last week. The only up day was Friday, when SPY gained 1.12% after unemployment fell.#-ad_banner-#​ Traders’ reaction to the good jobs report is a little puzzling. The Federal Reserve originally said it would start tapering when unemployment fell… Read More

A strong gain after Friday’s jobs report failed to reverse four days of losses, and stocks were unable to deliver their ninth consecutive weekly gain. A Pullback Continues to be Likely After eight weeks of consecutive gains, SPDR S&P 500 ETF (NYSE: SPY) closed down 0.03% last week. The only up day was Friday, when SPY gained 1.12% after unemployment fell.#-ad_banner-#​ Traders’ reaction to the good jobs report is a little puzzling. The Federal Reserve originally said it would start tapering when unemployment fell to 7%, the level reached in the latest report. In addition to the drop in the headline number, the economy created more jobs than expected. A strong employment report could allow the Fed to begin tapering soon, and traders have sold on concerns about potential tapering in the past. The unemployment report is confirming a number of other data series that point to a stronger economy. Average hourly earnings increased and are now up 2.03% when compared to a year ago, higher than the rate of inflation. The number of people in the labor force also rose in November. The… Read More

The past few years have been a great time to be an investor. Federal Reserve Chairman Ben Bernanke’s zero interest rate policy has fueled large gains in just about every market sector since 2009. There’s little question that his policies are bullish in the short term, but what happens when the Fed’s easy money stops?#-ad_banner-#​ For an answer to this, we can take a page out of baseball history. In 1998, Mark McGwire hit a record 70 home runs during the season, while Sammy Sosa hit 66. The previous record of 61 home runs had been… Read More

The past few years have been a great time to be an investor. Federal Reserve Chairman Ben Bernanke’s zero interest rate policy has fueled large gains in just about every market sector since 2009. There’s little question that his policies are bullish in the short term, but what happens when the Fed’s easy money stops?#-ad_banner-#​ For an answer to this, we can take a page out of baseball history. In 1998, Mark McGwire hit a record 70 home runs during the season, while Sammy Sosa hit 66. The previous record of 61 home runs had been set in 1961 by Roger Maris. In 2001, Barry Bonds broke McGwire’s record by hitting 73 home runs. At the time, baseball was an exciting sport to watch as home run records captured headlines. Later, fans learned that the hitters were abusing steroids. Home run outputs returned to normal after leaguewide steroid testing became the norm in 2003. Fed policy is acting like a performance-enhancing drug for the market. When it stops easing, I believe the markets will be unable to continue climbing at the frantic pace seen during the past year. Returns will be below average for some time,… Read More

Market tops and bottoms are always a popular topic of conversation. There are a number of theories about how to forecast key turning points in advance, but, in reality, those theories rarely work. While it does seem like an exercise in futility to forecast the day and price of tops and bottoms, there is valuable information to learn from studying the general nature of market turning points. This knowledge will help us understand what to look for and how to react to the market as it develops rather than provide a false sense of comfort about what we… Read More

Market tops and bottoms are always a popular topic of conversation. There are a number of theories about how to forecast key turning points in advance, but, in reality, those theories rarely work. While it does seem like an exercise in futility to forecast the day and price of tops and bottoms, there is valuable information to learn from studying the general nature of market turning points. This knowledge will help us understand what to look for and how to react to the market as it develops rather than provide a false sense of comfort about what we should see. In the stock market, we tend to see tops build slowly and bottoms appear unexpectedly. This can be seen in the chart below, which shows the 2007 market top on the left and the March 2009 bottom on the right. SPDR S&P 500 ETF (NYSE: SPY) built a top slowly, over a period of several months. The bottom, on the other hand, came unexpectedly and was greeted with disbelief.#-ad_banner-# This pattern has been seen at other significant stock market turning points. The bottom that occurred in 2002 was also unexpected and sudden, while the top in… Read More

After eight consecutive weeks of gains, it is time to consider when strength becomes exhaustion in the stock market. Overbought Eventually Means Overbought SPDR S&P 500 (NYSE: SPY) closed up 0.11% in a holiday-shortened trading week. This was the eighth time in a row SPY posted a weekly gain. It was also the smallest weekly gain in the winning streak and the second week in a row the rate of change has declined.#-ad_banner-# The concept of overbought is a challenging one, and traders have spent countless hours trying to understand it. Many indicators, such as… Read More

After eight consecutive weeks of gains, it is time to consider when strength becomes exhaustion in the stock market. Overbought Eventually Means Overbought SPDR S&P 500 (NYSE: SPY) closed up 0.11% in a holiday-shortened trading week. This was the eighth time in a row SPY posted a weekly gain. It was also the smallest weekly gain in the winning streak and the second week in a row the rate of change has declined.#-ad_banner-# The concept of overbought is a challenging one, and traders have spent countless hours trying to understand it. Many indicators, such as stochastics and Relative Strength Index (RSI), are used to define an overbought market, but they all share a common flaw. At the beginning of a very strong up move, markets become overbought and stay overbought. The chart below demonstrates the challenge of defining when a market is overbought. SPY is shown with the stochastics indicator. The monthly chart is used to decrease the sensitivity of the indicator, but similar patterns can be seen on weekly and daily charts. Stochastics became overbought in 2003 and remained overbought until the end of 2007. Read More

The S&P 500 has now closed higher seven weeks in a row. We need to consider the possibility that we are at the start of another bull market.#-ad_banner-#​ Stocks Are Bullish, but Not Bubbly After gaining 0.42% last week, SPDR S&P 500 (NYSE: SPY) is now up seven weeks in a row. While that gain may seem small, it is actually more than three times larger than the typical one-week gain in SPY. Since January 2001, the ETF has delivered an average one-week gain of 0.12%. Seven consecutive weeks of… Read More

The S&P 500 has now closed higher seven weeks in a row. We need to consider the possibility that we are at the start of another bull market.#-ad_banner-#​ Stocks Are Bullish, but Not Bubbly After gaining 0.42% last week, SPDR S&P 500 (NYSE: SPY) is now up seven weeks in a row. While that gain may seem small, it is actually more than three times larger than the typical one-week gain in SPY. Since January 2001, the ETF has delivered an average one-week gain of 0.12%. Seven consecutive weeks of gains is an unusual price move for the broad stock market averages. It indicates that there is a great deal of demand for stocks and traders are buying. This is obviously an oversimplification, but in general terms, demand exceeding supply is the underlying cause of a price rise in any market. When stocks bottomed in March 2009, SPY moved up six weeks in a row. That is typical of the price action at market bottoms. We saw similar signs of strength in 2002, and in the Dow Jones Industrial Average at the beginning of the historic bull market in 1982. Read More

Last week, stock prices reacted to the news. Stock picking could become more important as the market reaches new highs, and one technical indicator could be helpful to traders looking to avoid downside surprises. It Is Becoming a Market of Stocks Fed chair nominee Janet Yellen confirmed that quantitative easing and low interest rates should continue for the foreseeable future. Traders seem to believe this is good news, and SPDR S&P 500 (NYSE: SPY) gained 1.56% last week.#-ad_banner-# The ETF has now closed up six weeks in a row. SPY has had a winning streak of this length 15… Read More

Last week, stock prices reacted to the news. Stock picking could become more important as the market reaches new highs, and one technical indicator could be helpful to traders looking to avoid downside surprises. It Is Becoming a Market of Stocks Fed chair nominee Janet Yellen confirmed that quantitative easing and low interest rates should continue for the foreseeable future. Traders seem to believe this is good news, and SPDR S&P 500 (NYSE: SPY) gained 1.56% last week.#-ad_banner-# The ETF has now closed up six weeks in a row. SPY has had a winning streak of this length 15 times in the past 20 years. In the short term, this winning streak offers us little information. The next week closed up seven times and lower eight times. Longer term, SPY was up six months later 80% of the time. The winning streak is interesting, but in the long run, stock prices are driven by earnings, and the trend in earnings is likely to determine whether prices are higher or lower six months from now. Earnings season came to an unofficial end when Wal-Mart (NYSE: WMT) reported last week. On this front, the results were mixed. Among the large-cap stocks… Read More

The past few years have been a great time to be an investor. Federal Reserve Chairman Ben Bernanke’s zero interest rate policy has fueled large gains in just about every market sector since 2009. There’s little question that his policies are bullish in the short term, but what happens when the Fed’s easy money stops? For an answer to this, we can take a page out of baseball history. In 1998, Mark McGwire set a record by hitting 70 home runs during the season, while Sammy Sosa hit 66. The previous record of 61 home runs had been set in… Read More

The past few years have been a great time to be an investor. Federal Reserve Chairman Ben Bernanke’s zero interest rate policy has fueled large gains in just about every market sector since 2009. There’s little question that his policies are bullish in the short term, but what happens when the Fed’s easy money stops? For an answer to this, we can take a page out of baseball history. In 1998, Mark McGwire set a record by hitting 70 home runs during the season, while Sammy Sosa hit 66. The previous record of 61 home runs had been set in 1961 by Roger Maris. In 2001, Barry Bonds broke McGwire’s record by hitting 73 home runs. At the time, baseball was an exciting sport to watch as home run records captured headlines. Later, fans learned that the hitters were abusing steroids. Home run outputs returned to normal after leaguewide steroid testing became the norm in 2003. Fed policy is acting like a performance-enhancing drug for the market. When it stops easing, I believe the markets will be unable to continue climbing at the frantic pace seen during the past year. Returns will be below average for some time, and stock… Read More