Despite a strong rebound on Friday, the major U.S. indices closed lower again last week. Leading the way down were the small-cap Russell 2000 and blue-chip Dow Jones Industrial Average, which each lost 1.4% for the week. #-ad_banner-# The week’s most important technical event was the S&P 500’s ability to once again test and hold major support at 1,821, triggering a rebound Friday. I identified this level in the Jan. 19 Market Outlook as being critical to the market’s intermediate-term direction.  As I said last week, this “is where the S&P 500 should stabilize and begin an eventual… Read More

Despite a strong rebound on Friday, the major U.S. indices closed lower again last week. Leading the way down were the small-cap Russell 2000 and blue-chip Dow Jones Industrial Average, which each lost 1.4% for the week. #-ad_banner-# The week’s most important technical event was the S&P 500’s ability to once again test and hold major support at 1,821, triggering a rebound Friday. I identified this level in the Jan. 19 Market Outlook as being critical to the market’s intermediate-term direction.  As I said last week, this “is where the S&P 500 should stabilize and begin an eventual retest of the May 2015 highs… if the recent decline was just a correction within a healthy bull market. If the market cannot stabilize at this level, it warns equities are in the midst of an emerging bear market.” The only sector of the S&P 500 to post a gain last week was consumer staples, which rose just 0.9%. Financials and utilities were among the weakest sectors, each down 2.2%.  Not surprisingly, Asbury Research’s own metric shows the biggest outflows from sector bet-related ETFs over the past one-week, one-month and three-month periods came from financials. This fueled last… Read More

The major U.S. indices closed sharply lower last week, following a sharp-but-short-lived, two-week broader market rally. #-ad_banner-#Last week’s sell-off was led by the tech-heavy Nasdaq 100, off 6%, and small-cap Russell 2000, down 4.8%. This weakness could be especially problematic since high-beta technology stocks and small caps typically lead the broader market higher and lower. The only sectors to post meaningful gains were materials, boosted by a strong rebound in gold prices, which I will discuss in more detail in this report, and defensive utilities.  The table below shows that, according to Asbury Research’s own metric, the biggest inflow into… Read More

The major U.S. indices closed sharply lower last week, following a sharp-but-short-lived, two-week broader market rally. #-ad_banner-#Last week’s sell-off was led by the tech-heavy Nasdaq 100, off 6%, and small-cap Russell 2000, down 4.8%. This weakness could be especially problematic since high-beta technology stocks and small caps typically lead the broader market higher and lower. The only sectors to post meaningful gains were materials, boosted by a strong rebound in gold prices, which I will discuss in more detail in this report, and defensive utilities.  The table below shows that, according to Asbury Research’s own metric, the biggest inflow into sector bet-related ETFs over the past one-week, one-month and three-months periods went to utilities, fueling last week’s strength in that sector. As long as these positive inflows continue, utilities are likely to remain strong and continue outperforming. Market At Important Crossroad Since I warned traders in the Dec. 14 Market Outlook that it was time to adopt defensive strategies to protect assets in the short term, the S&P 500 lost 6.6% through Friday’s close. The decline resulted in a test of important support at 1,821 on Jan. 20, a level I identified in the Jan. 19 report. After… Read More

The major U.S. indices closed higher last week, adding to the previous week’s gains. The rebound was led by the blue-chip Dow Jones Industrial Average, which climbed 2.3%. The tech-heavy Nasdaq 100 — which typically leads the market both higher and lower — brought up the rear with gains of just 0.5%. #-ad_banner-# From a sector standpoint, last week’s advance was led by downtrodden energy. The sector is closely tied to crude oil prices and gained 4.4% on the hopes that oil supply is set to decrease. The next strongest sectors were both defensive, though, with utilities and… Read More

The major U.S. indices closed higher last week, adding to the previous week’s gains. The rebound was led by the blue-chip Dow Jones Industrial Average, which climbed 2.3%. The tech-heavy Nasdaq 100 — which typically leads the market both higher and lower — brought up the rear with gains of just 0.5%. #-ad_banner-# From a sector standpoint, last week’s advance was led by downtrodden energy. The sector is closely tied to crude oil prices and gained 4.4% on the hopes that oil supply is set to decrease. The next strongest sectors were both defensive, though, with utilities and consumer staples gaining 3.7% and 3% respectively. It’s too early to fully assess the sustainability of this rally, but this lack of leadership doesn’t instill much confidence that it’s more than a mere correction in an uncompleted market decline. More clues to the sustainability of the current rebound can be found by watching which areas of the market lead and lag in weeks ahead. Important Resistance Is On The Horizon  The bellwether S&P 500 has aggressively rebounded from its test of underlying support at 1,821 — a level I first discussed in the Jan. 19 Market Outlook. The chart below… Read More

If you’re feeling the pain from the recent selloff, you’re not alone. David Einhorn is probably feeling it, too. The investing guru is in the process of recovering from one of his worst years on record. Einhorn’s firm, Greenlight Capital, lost 20% of its value in 2015. The S&P 500, by contrast, gained about 1%. And after the rough selloff we’ve experienced to start 2016, things might be looking even worse. This was only the second losing year in Greenlight’s nearly 20-year history. The fund has returned 1,902% over its existence, or 16.5% annualized, after fees and expenses. The other… Read More

If you’re feeling the pain from the recent selloff, you’re not alone. David Einhorn is probably feeling it, too. The investing guru is in the process of recovering from one of his worst years on record. Einhorn’s firm, Greenlight Capital, lost 20% of its value in 2015. The S&P 500, by contrast, gained about 1%. And after the rough selloff we’ve experienced to start 2016, things might be looking even worse. This was only the second losing year in Greenlight’s nearly 20-year history. The fund has returned 1,902% over its existence, or 16.5% annualized, after fees and expenses. The other losing year was, understandably, in 2008. The fund’s value dropped 23% that year. #-ad_banner-#Posting a year like Einhorn did means that not only are his fortune and reputation at stake, but so too are the fortunes of those who’ve invested with his hedge fund. But before you shed crocodile tears for a hedge fund billionaire and the wealthy individuals who participate in Einhorn’s fund, just remember that if one of the most successful investors of the modern era can suddenly witness a sea of red wash across his portfolio, then so can you and I. So what went wrong? Einhorn’s… Read More

The major U.S. indices overcame early weakness last week to post across-the-board gains. The advance was led by the tech-heavy Nasdaq 100, which gained 2.9%, although the market-leading index is still down 7.3% for 2016. The rebound followed a successful test of underlying support at 1,821 in the benchmark S&P 500, which I discussed in last week’s Market Outlook. This is an important intermediate-term decision point for the broader market. From here a new one- or two-quarter advance should begin if the current decline is just a correction within a larger bull market. But I am not yet… Read More

The major U.S. indices overcame early weakness last week to post across-the-board gains. The advance was led by the tech-heavy Nasdaq 100, which gained 2.9%, although the market-leading index is still down 7.3% for 2016. The rebound followed a successful test of underlying support at 1,821 in the benchmark S&P 500, which I discussed in last week’s Market Outlook. This is an important intermediate-term decision point for the broader market. From here a new one- or two-quarter advance should begin if the current decline is just a correction within a larger bull market. But I am not yet convinced this is the case. #-ad_banner-# From a sector standpoint, last week’s rally was led by technology, which gained 2.6%. However, a look under the hood via Asbury Research’s investor asset flows-based metric shows the percentage of sector bet-related assets being invested in technology has actually been contracting since December. So, unless this quickly changes to a trend of expansion, the recent sector outperformance is likely to be short lived. Keep Support Must Hold Or Watch Out Below The chart below shows the S&P 500 testing and holding underlying support at 1,821 on Wednesday. It then rebounded… Read More

Shell shock from Asian exchanges continues to spread to the U.S. market.  On Wednesday, the Dow dropped 248 points to close below 15,800 and the broader S&P 500 lost more than 1%. That puts the index down nearly 10% for the year so far, and down just over 14% from the previous 52-week high that was set in May last year. The Volatility Index, which measures the market’s mood based on sophisticated traders’ positions in options contracts, has recently jumped to nearly 30, about twice its normal reading. #-ad_banner-#That’s a wrap-up of what you’ll hear on the financial channels.  And… Read More

Shell shock from Asian exchanges continues to spread to the U.S. market.  On Wednesday, the Dow dropped 248 points to close below 15,800 and the broader S&P 500 lost more than 1%. That puts the index down nearly 10% for the year so far, and down just over 14% from the previous 52-week high that was set in May last year. The Volatility Index, which measures the market’s mood based on sophisticated traders’ positions in options contracts, has recently jumped to nearly 30, about twice its normal reading. #-ad_banner-#That’s a wrap-up of what you’ll hear on the financial channels.  And that coverage misses the point. I’ve been sounding the alarm bell about China for a while now, and with such rampant uncertainty about the fallout — when and where it will end and how far it will fall — the global picture is probably going to get worse before it gets better.  But here’s what you need to keep in mind. Here is what no one else is going to mention… The mainstream financial media is there to broadcast a story. I’m here to temper their adrenaline with a little hyper-rationality.  A critical element of successful investing — and one… Read More

It’s official: we’re in correction territory. A correction is officially defined as when a stock or index declines by 10% or more. If we get a 20% dip, then it’s a full-blown bear market. There are a couple of culprits for the rocky start to 2016, but it essentially boils down to two things: 1) China is a mess — something we’ve touched on repeatedly here at StreetAuthority (see: this and this); 2) Oil prices continue to plummet (more on that in today’s issue). The current correction looks remarkably similar to the one we experienced last August. That was also largely blamed… Read More

It’s official: we’re in correction territory. A correction is officially defined as when a stock or index declines by 10% or more. If we get a 20% dip, then it’s a full-blown bear market. There are a couple of culprits for the rocky start to 2016, but it essentially boils down to two things: 1) China is a mess — something we’ve touched on repeatedly here at StreetAuthority (see: this and this); 2) Oil prices continue to plummet (more on that in today’s issue). The current correction looks remarkably similar to the one we experienced last August. That was also largely blamed on the same two factors: China and oil. As you can see in the chart above, the last time we saw a market correction, things eventually simmered down and share prices recovered.  Whether recent history repeats itself is anybody’s guess.  I know that may sound disconcerting to some of you. But I don’t believe in making hunches or predictions in order to mollify nervous readers. That’s simply not our style. Our job is to help make you a better investor and identify what we think are some of the best opportunities to profit along the way. #-ad_banner-#So what… Read More

The carnage on Wall Street continued last week. Stocks finished sharply lower, led by the small-cap Russell 2000, which lost 3.7% to end Friday down 11.3% for the year. Of the major indices, the S&P 500 shows the smallest year-to-date loss, off 8%. While there are a few reasons to believe the market may be approaching a meaningful bottom, I unfortunately do not see any tangible evidence suggesting one is in place. Until that happens, I will remain on the defensive. #-ad_banner-# From a sector standpoint, last week’s market weakness was led by materials, which lost… Read More

The carnage on Wall Street continued last week. Stocks finished sharply lower, led by the small-cap Russell 2000, which lost 3.7% to end Friday down 11.3% for the year. Of the major indices, the S&P 500 shows the smallest year-to-date loss, off 8%. While there are a few reasons to believe the market may be approaching a meaningful bottom, I unfortunately do not see any tangible evidence suggesting one is in place. Until that happens, I will remain on the defensive. #-ad_banner-# From a sector standpoint, last week’s market weakness was led by materials, which lost 4.5% compared to the S&P 500’s 2.2% decline.  The only sector of the S&P 500 to finish in positive territory for the week was defensive utilities, which gained 0.7%. As I’ve mentioned, the recent decline in long-term interest rates — which has been driven by a strong shift in investor assets back into the relative safety of U.S. Treasuries — has drawn yield-seeking investors back into riskier but better paying utilities. Retail Remains Vulnerable In last week’s Market Outlook, I said my work targeted a drop in the SPDR S&P Retail ETF (NYSE: XRT) to $40, and that its positive… Read More

When the Federal Reserve started raising rates in 1994, it drove interest rates up 2.5% in less than a year. The result was a bond market massacre that bled into stocks for a 3% loss on the year for the S&P 500.       There’s no question that the Fed needs to normalize rates right now after an historic easy money policy but the question is, how quickly will rates increase and should investors be worried about a repeat of 1994? #-ad_banner-#It’s a question that forced the market to a loss of 0.7% last year — and analysts… Read More

When the Federal Reserve started raising rates in 1994, it drove interest rates up 2.5% in less than a year. The result was a bond market massacre that bled into stocks for a 3% loss on the year for the S&P 500.       There’s no question that the Fed needs to normalize rates right now after an historic easy money policy but the question is, how quickly will rates increase and should investors be worried about a repeat of 1994? #-ad_banner-#It’s a question that forced the market to a loss of 0.7% last year — and analysts are predicting still higher rates through 2016. Against this fear in the market, there’s good reason to believe that rates aren’t going anywhere. If long-term rates stay low, it could be one of the biggest head-fakes of the year and lead to a huge rebound in rate-sensitive investments. Rates Go Up, Treasuries Fall? The Federal Reserve began its historic path to normalize rates after six years of easy money on December 16. Since that time, the rate on the 10-year Treasury has actually decreased by 0.15% rather than increased. Pundits will attribute the drop in rates to market volatility… Read More

In mid-December, I warned that although my intermediate-term outlook (one to two quarters) for the U.S. stock market was bullish, Market Outlook readers should consider adopting defensive strategies to protect assets in the short term. Following an ill-fated attempt at a Santa Claus rally, the weakness I was afraid of emerged with a vengeance last week. In fact, this year’s nasty stock market decline has already done so much technical damage that it calls my positive intermediate-term bias into question. ​#-ad_banner-#The S&P 500 collapsed by 122 points, or 6%, to its lowest level… Read More

In mid-December, I warned that although my intermediate-term outlook (one to two quarters) for the U.S. stock market was bullish, Market Outlook readers should consider adopting defensive strategies to protect assets in the short term. Following an ill-fated attempt at a Santa Claus rally, the weakness I was afraid of emerged with a vengeance last week. In fact, this year’s nasty stock market decline has already done so much technical damage that it calls my positive intermediate-term bias into question. ​#-ad_banner-#The S&P 500 collapsed by 122 points, or 6%, to its lowest level since early October, exceeding my initial downside target of 1,965. The market-leading Nasdaq 100 and Russell 2000, which represent the technology and small-cap spaces, fared even worse, declining 7% and 7.9%, respectively.   From a sector standpoint, last week’s broader market decline was led by financial services, which lost 8.7%. This was driven by a strong shift in investor assets back into the relative safety of U.S. Treasuries, which pushed long-term interest rates lower. Declining long-term interest rates eat into the profits of lending institutions.  The best-performing sector was utilities, which only lost 0.4%. The decline in long-term rates encouraged… Read More