The U.S. stock market cooled off a little this past week on the heels of four consecutive weekly gains. The tech-heavy Nasdaq 100 and small-cap Russell 2000 closed slightly higher, but the benchmark S&P 500 and blue-chip Dow Jones Industrial Average finished the week fractionally lower. #-ad_banner-# The S&P 500 has already risen 9.1% since its Brexit low, and my work now suggests downside risk may exceed upside potential in the near term. Technology was largely responsible for what little market strength there was last week, with the sector advancing… Read More

The U.S. stock market cooled off a little this past week on the heels of four consecutive weekly gains. The tech-heavy Nasdaq 100 and small-cap Russell 2000 closed slightly higher, but the benchmark S&P 500 and blue-chip Dow Jones Industrial Average finished the week fractionally lower. #-ad_banner-# The S&P 500 has already risen 9.1% since its Brexit low, and my work now suggests downside risk may exceed upside potential in the near term. Technology was largely responsible for what little market strength there was last week, with the sector advancing 1.4%. Consumer staples, energy and utilities were the worst-performing sectors. Asbury Research’s own ETF asset flows-based metric shows that the biggest inflow of sector bet-related investor dollars over the past one-month and three-month periods went into health care, which fueled the sector’s outperformance. Since its March 17 low, health care has gained 13.4% — more than double the broader market’s 6.5% gain. As long as these inflows of investor assets continue, I expect this trend to continue. Texas Instruments Crushes the Market In the July 11 Market Outlook, I pointed out a bullish breakout in technology bellwether Texas… Read More

I have a long time client who is always convinced that the financial sky is falling. Recently he called me, worried that the nation is $19 trillion in debt. He’s not alone in this worry — $19 trillion sounds like a lot. But is that a real number? And how fast is the debt train hurtling towards us? So I decided to do some research. #-ad_banner-# In the most recent audit of the Bureau of Fiscal Services for fiscal years 2014 and 2015 by the Government Accountability Office, the total gross federal debt outstanding is $18.138 trillion. That’s 4.5% less… Read More

I have a long time client who is always convinced that the financial sky is falling. Recently he called me, worried that the nation is $19 trillion in debt. He’s not alone in this worry — $19 trillion sounds like a lot. But is that a real number? And how fast is the debt train hurtling towards us? So I decided to do some research. #-ad_banner-# In the most recent audit of the Bureau of Fiscal Services for fiscal years 2014 and 2015 by the Government Accountability Office, the total gross federal debt outstanding is $18.138 trillion. That’s 4.5% less than $19 trillion. Don’t you feel better? Here’s one of the most interesting facts I uncovered. Nearly one third of the outstanding debt, 27.6% to be exact, is held by federal government agencies such as the Social Security Administration, FDIC, the Postal Service Retirees Fund, or the Department of Labor’s unemployment trust fund. If we subtract federally held debt then that means that $13.12 trillion of what the report refers to as marketable securities (they can be resold at any time) are held by the public. But all this debt is going to mature one day? Yes it is. In… Read More

If you invest in stocks, you probably love the thrill of buying an undervalued gem that rises 50% in a few months — or that triples over two years. Who doesn’t? It’s a great feeling. But it doesn’t happen every day. And counting on a big score is no substitute for a well-constructed, diversified portfolio that builds wealth over time. For most investors, the foundation of a long-term portfolio is a mix of large-, mid- and small-cap stocks that includes some dependable income payers. Dividend-paying stocks tend to be less volatile, and the income they generate provides ballast to a… Read More

If you invest in stocks, you probably love the thrill of buying an undervalued gem that rises 50% in a few months — or that triples over two years. Who doesn’t? It’s a great feeling. But it doesn’t happen every day. And counting on a big score is no substitute for a well-constructed, diversified portfolio that builds wealth over time. For most investors, the foundation of a long-term portfolio is a mix of large-, mid- and small-cap stocks that includes some dependable income payers. Dividend-paying stocks tend to be less volatile, and the income they generate provides ballast to a portfolio that also includes more aggressive offerings. #-ad_banner-#But in addition to those benefits, most dividend payers allow investors to generate wealth over time through an underrated strategy that couldn’t be simpler: using dividends to buy more shares by automatically reinvesting them. Dividend reinvestment is a common practice in retirement plans for investors under 59½. That’s because it allows for no-decision buy-and-hold investing in a portfolio that doesn’t allow withdrawals anyway. (Outside a retirement portfolio, it’s not a bad choice either — just remember that you’ll have to pay taxes on the dividend amounts, so you’ll need to use cash from… Read More

Netflix (Nasdaq: NFLX) lost a staggering $6 billion of its market cap in one day as shares plunged 14% on July 19. The company’s second-quarter earnings report was a shocking disappointment as subscriber numbers came in well below expectations. Analysts were quick to cut earnings estimates and question target prices following the news, but this kind of post-earnings mayhem is nothing new for the world’s largest streaming subscription service. In fact, data over the past 10 quarters shows double-digit price swings are the norm after the company’s earnings announcements. #-ad_banner-#… Read More

Netflix (Nasdaq: NFLX) lost a staggering $6 billion of its market cap in one day as shares plunged 14% on July 19. The company’s second-quarter earnings report was a shocking disappointment as subscriber numbers came in well below expectations. Analysts were quick to cut earnings estimates and question target prices following the news, but this kind of post-earnings mayhem is nothing new for the world’s largest streaming subscription service. In fact, data over the past 10 quarters shows double-digit price swings are the norm after the company’s earnings announcements. #-ad_banner-# And historical data uncovers another interesting post-earnings trend that traders can take advantage of. Bad News Can’t Keep Netflix Down Few stocks are as volatile as Netflix after it reports earnings. Looking at the past 10 earnings announcements, shares have fallen an average of 11% on disappointing reports and have gained an average of 13% when the company reports good news. But a funny thing happens following the big post-earnings moves… the shares tend to move higher regardless of whether the company reports good news or bad. Shares of NFLX moved an average of 6% higher in the month following… Read More

Last week, the major U.S. stock indices posted their fourth consecutive weekly gain. The rally was led by the tech-heavy Nasdaq 100, which advanced 1.7%, lifting this market-leading index further into positive territory for the year. From a sector standpoint, the rally was led by technology (1.8%) and utilities (1.5%), while energy (-1.3%) was the week’s big loser. #-ad_banner-# In last week’s report, I warned investors of a potential pullback in stocks in late July due to extremes in investor complacency that were apparent in both the Volatility S&P 500… Read More

Last week, the major U.S. stock indices posted their fourth consecutive weekly gain. The rally was led by the tech-heavy Nasdaq 100, which advanced 1.7%, lifting this market-leading index further into positive territory for the year. From a sector standpoint, the rally was led by technology (1.8%) and utilities (1.5%), while energy (-1.3%) was the week’s big loser. #-ad_banner-# In last week’s report, I warned investors of a potential pullback in stocks in late July due to extremes in investor complacency that were apparent in both the Volatility S&P 500 (VIX) and the CBOE Put/Call Ratio. These extremes indicated historically low market volatility and extremely low put volume relative to call volume. Both of these conditions remain heading into this week, so caution is still warranted. Watch Semis For Signs Of A Pullback Now that we know the market is vulnerable to a pullback, the next logical question is: Where is the pullback likely to start? This week’s first chart shows the PHLX Semiconductor (SOX) index closing in on a test of formidable overhead resistance at its 751 benchmark high from June 2015. That line is only 1.2% above Friday’s close. Read More

Emerging markets have had a tough few years. Slowing growth in China after the global financial crisis has meant reduced commodity demand and weaker investor sentiment for the group. Then the plunge in crude prices led to lower income for oil-producing nations, along with weakening currencies and falling foreign direct investment.  But 2016 looked to be the year the group could turn a corner. The price of oil and of some metals has rebounded, and dollar strength has plateaued. The iShares MSCI Emerging Markets (NYSE: EEM) was up 26% in mid-July from its January low.  #-ad_banner-#One particular emerging market looked… Read More

Emerging markets have had a tough few years. Slowing growth in China after the global financial crisis has meant reduced commodity demand and weaker investor sentiment for the group. Then the plunge in crude prices led to lower income for oil-producing nations, along with weakening currencies and falling foreign direct investment.  But 2016 looked to be the year the group could turn a corner. The price of oil and of some metals has rebounded, and dollar strength has plateaued. The iShares MSCI Emerging Markets (NYSE: EEM) was up 26% in mid-July from its January low.  #-ad_banner-#One particular emerging market looked to be a standout among the group, with shares of its country fund up 37% from the January low just to the end of April. The country’s current account deficit, the difference between exports and imports, shrank to a five-year low in 2015 and foreign investors were pouring money into the economy. That is, until political uncertainty started gripping the country in late April and erupted in a failed coup this month.  Shares of the country fund are now down 22% from their 52-week high and may be the best buy in emerging markets this year. Historical evidence shows that… Read More

As a market analyst, my job is to make sense of the markets and to uncover the real reason stocks rise and fall — and then use that information to help others profit. My methods go far beyond just buying a good quality stock or shorting a pricey one, though.  Countless hours of research go into finding what I call “disconnects” between where a stock is trading and where it should be trading based on past precedents, peer values and earnings growth potential.  #-ad_banner-#An example of a disconnect is a weak stock or index that’s moving higher, or possibly even… Read More

As a market analyst, my job is to make sense of the markets and to uncover the real reason stocks rise and fall — and then use that information to help others profit. My methods go far beyond just buying a good quality stock or shorting a pricey one, though.  Countless hours of research go into finding what I call “disconnects” between where a stock is trading and where it should be trading based on past precedents, peer values and earnings growth potential.  #-ad_banner-#An example of a disconnect is a weak stock or index that’s moving higher, or possibly even moving lower, but hasn’t fallen fast enough given the data.  And what I’m seeing today is one of the biggest disconnects I’ve seen. It makes absolutely no sense!  The S&P 500 is relentlessly climbing to new highs despite the fact that we are deep into an earnings recession.  “S&P 500 companies have posted negative growth for six straight quarters, a stretch that’s been exceeded only once since 1936. That was the seven-quarter slump of the 2007-2009 recession.” — Bloomberg The chart below will help you visualize just how insane the market’s behavior… Read More