The major U.S. indices were mixed last week, closing on Friday just slightly on either side of unchanged. The tech-heavy Nasdaq 100 and small-cap Russell 2000 were the strongest performers. As long as the May trend of relative outperformance by these two market-leading indices continues, so should the current broad market advance. #-ad_banner-#The two strongest market sectors last week were consumer discretionary and utilities. My own asset-flow based metric shows that the biggest increase in sector bet-related assets over the past one-week and one-month periods was in utilities, which supports more upcoming strength… Read More

The major U.S. indices were mixed last week, closing on Friday just slightly on either side of unchanged. The tech-heavy Nasdaq 100 and small-cap Russell 2000 were the strongest performers. As long as the May trend of relative outperformance by these two market-leading indices continues, so should the current broad market advance. #-ad_banner-#The two strongest market sectors last week were consumer discretionary and utilities. My own asset-flow based metric shows that the biggest increase in sector bet-related assets over the past one-week and one-month periods was in utilities, which supports more upcoming strength in this sector. A strengthening utilities sector is often driven by declining long-term U.S. interest rates, which we saw last week as the yield on the 10-year Treasury note declined by 9 basis points to 2.53%. This encourages yield-seeking investors to accept more credit risk (via utility stocks) in exchange for potentially higher returns. Therefore, as long as long-term interest rates continue to decline, it should drive more investor assets into utilities and buoy Treasury prices, which move inversely to yields. Small Caps, Tech Should Continue Leading the Way In the May 19 Market Outlook, I pointed… Read More

All major U.S. indices finished with gains last week, led by the small-cap Russell 2000, which was up 2.2% and moved back into positive territory for the year. Year to date, the strongest major index has been the tech-heavy Nasdaq 100, up 5.9%. Since technology and small-cap stocks typically lead the broader market, both higher and lower, we will view upcoming performance in these two key indices as a barometer of the market’s ability to extend its 2014 advance. #-ad_banner-#From a sector standpoint, one that I will be watching closely over the next month is consumer staples. My proprietary asset… Read More

All major U.S. indices finished with gains last week, led by the small-cap Russell 2000, which was up 2.2% and moved back into positive territory for the year. Year to date, the strongest major index has been the tech-heavy Nasdaq 100, up 5.9%. Since technology and small-cap stocks typically lead the broader market, both higher and lower, we will view upcoming performance in these two key indices as a barometer of the market’s ability to extend its 2014 advance. #-ad_banner-#From a sector standpoint, one that I will be watching closely over the next month is consumer staples. My proprietary asset flow metric shows that it has had the largest investor inflows over the past one-week and one-month periods. For perspective, similarly aggressive investor inflows into the energy sector in early March preceded 9% relative sector outperformance versus the S&P 500 between then and now. VIX Suggests Stock Market Advance Isn’t Over Yet ​In last week’s Market Outlook, I pointed out that the CBOE Volatility Index (VIX) finished the previous week just below its 50-day moving average at 13.01. I noted, “The past three times that the VIX made a… Read More

It’s awfully quiet out there. Perhaps too quiet.  #-ad_banner-#The S&P hasn’t made a 1% move — in either direction — since April 16.  How unusual is it for the market to go 43 trading sessions (and counting) without a one-day move of 1% or more? Going back to 1980, the market has only had three longer streaks, according to MKM Partners’ Jonathan Krinsky. If we reach 48 straight days without a 1% move, this current streak will move into third place.  What happens when such streaks end? The market has invariably dropped at least 3% within a month of the… Read More

It’s awfully quiet out there. Perhaps too quiet.  #-ad_banner-#The S&P hasn’t made a 1% move — in either direction — since April 16.  How unusual is it for the market to go 43 trading sessions (and counting) without a one-day move of 1% or more? Going back to 1980, the market has only had three longer streaks, according to MKM Partners’ Jonathan Krinsky. If we reach 48 straight days without a 1% move, this current streak will move into third place.  What happens when such streaks end? The market has invariably dropped at least 3% within a month of the streak’s end, according to MKM.  As you’d expect in such a quiet market, investors are exhibiting little fear. In a weekly survey of investor sentiment, the American Association of Individual Investors (AAII) noted that roughly 45% of responders were bullish. That’s the highest reading yet for 2014.  And the VIX, also known as the fear gauge, has fallen back to very low levels. “The perception of U.S. equity market risk is as low as it has been since 2004-06 when Fed predictability peaked,” notes UBS’s Maury Harris.  Indeed, the Federal Reserve’s announcement earlier this year that it will steadily reduce… Read More

All major U.S. indices finished last week in negative territory, giving back a significant portion of their May gains. Interestingly, the decline was led by the defensive Dow industrials, while the Nasdaq 100 and Russell 2000 fared better, down just 0.5% and 0.2%, respectively. Despite the decline, all major U.S. indices except for the Russell are still in positive territory for the year. #-ad_banner-#The only sector of the S&P 500 that finished last week in the black was energy, gaining 1.7%. My own asset flow-based metric shows that the largest sector bet-related inflows over the past one-week, one-month and three-month… Read More

All major U.S. indices finished last week in negative territory, giving back a significant portion of their May gains. Interestingly, the decline was led by the defensive Dow industrials, while the Nasdaq 100 and Russell 2000 fared better, down just 0.5% and 0.2%, respectively. Despite the decline, all major U.S. indices except for the Russell are still in positive territory for the year. #-ad_banner-#The only sector of the S&P 500 that finished last week in the black was energy, gaining 1.7%. My own asset flow-based metric shows that the largest sector bet-related inflows over the past one-week, one-month and three-month periods were in energy. Largely due to these inflows, energy has outperformed with an 11.2% year-to-date gain versus 4.8% for the S&P 500. Trend Still Bullish, but Beware of Seasonal Headwinds In the May 12 Market Outlook, I pointed out an emerging bullish pattern in the SPDR Dow Jones Industrial Average (NYSE: DIA). I said, “A sustained rise above $165.51 would confirm a breakout from four months of sideways indecision in DIA that would target a 7% advance to $177.” The breakout I was expecting actually took place on… Read More

All major U.S. indices finished last week in positive territory, led by the Russell 2000 and Nasdaq 100. As I said in last week’s report, this is always a near-term positive sign for the overall market as small-cap and technology stocks typically lead the S&P 500 both higher and lower. #-ad_banner-#​Outperformance by these areas of the market indicates that investors are in a “risk on” mode and are willing to buy riskier, more volatile stocks to capture a better return. Last week’s strong performance by the Russell 2000 puts it back into positive territory year to date for the first… Read More

All major U.S. indices finished last week in positive territory, led by the Russell 2000 and Nasdaq 100. As I said in last week’s report, this is always a near-term positive sign for the overall market as small-cap and technology stocks typically lead the S&P 500 both higher and lower. #-ad_banner-#​Outperformance by these areas of the market indicates that investors are in a “risk on” mode and are willing to buy riskier, more volatile stocks to capture a better return. Last week’s strong performance by the Russell 2000 puts it back into positive territory year to date for the first time since April 4. There, it joins the other major U.S. indexes, led by the Nasdaq 100, which is up 5.6% in 2014.  From a sector standpoint, last week’s broad market advance was led by industrials (+2.3%), financials (+2.3%) and consumer discretionary (+1.9%). Meanwhile, defensive sectors like health care and consumer staples were relatively weak.  Recent Breakouts Point to More Near-Term Strength In the May 27 Market Outlook, I said the rise above 3,617 in the Nasdaq 100 “clears the way for more near-term strength and a potential 2% rise to retest the 3,738… Read More

While I am not a “perma-bear” by any means, I must admit that I’ve been perplexed by this unrelenting, “to the moon” bull market, which hasn’t really cooled off since it began over five years ago. #-ad_banner-#New highs are the norm now, with the market shrugging off bad news and eating up any bit of good news. Nearly every index is outperforming, many without so much as a small pullback here and there. But notice that I said “nearly” — one index group in particular has recently cooled off, which makes me think that others could… Read More

While I am not a “perma-bear” by any means, I must admit that I’ve been perplexed by this unrelenting, “to the moon” bull market, which hasn’t really cooled off since it began over five years ago. #-ad_banner-#New highs are the norm now, with the market shrugging off bad news and eating up any bit of good news. Nearly every index is outperforming, many without so much as a small pullback here and there. But notice that I said “nearly” — one index group in particular has recently cooled off, which makes me think that others could follow suit by the end of this year. I’m talking specifically about indices made up of stocks with smaller market caps. It’s well known that small-cap stocks perform better than their larger counterparts over time, especially coming out of a recession, when growth is easier to come by. However, when the market slows down and investors turn to large-cap stocks for stability and dividends, small-caps are the first to get snubbed. Any downturn following that peak often sees small-caps getting beaten up at close to the same rate they grew in the first place. In the… Read More

A long period of slow economic growth and dormant inflation has led to almost universal complacency.  #-ad_banner-#Everyone continues to repeat the same mantra that the Federal Reserve will continue to support the economy through ultra-low interest rates well into the future. Yet beneath the surface, the economy is beginning to rumble, and such a benign view can catch the market off guard. And as soon as June 6, the investor chatter may start to take on a very different tone. That day will bring the all-important monthly employment report, which is likely to produce a gain of at least 200,000… Read More

A long period of slow economic growth and dormant inflation has led to almost universal complacency.  #-ad_banner-#Everyone continues to repeat the same mantra that the Federal Reserve will continue to support the economy through ultra-low interest rates well into the future. Yet beneath the surface, the economy is beginning to rumble, and such a benign view can catch the market off guard. And as soon as June 6, the investor chatter may start to take on a very different tone. That day will bring the all-important monthly employment report, which is likely to produce a gain of at least 200,000 net new jobs for the fourth month in a row. The four-week moving average of weekly unemployment claims has moved to its lowest level in seven years, underscoring the improving health of the job market. Yet economists at Deutsche Bank think the forward view is more important. They looked at a series of recent economic data points and then took a fresh look at the current 6.3% national unemployment rate. Their conclusion: “Based on its current trajectory, the rate should fall significantly further over the next year and a half.”  Quite suddenly, the U.S. economy is shaping up to… Read More

All major U.S. indices finished last week in positive territory, led by the Nasdaq 100. This is a positive near-term factor for the overall market because technology stocks typically lead the broader market both higher and lower. For 2014, all major indices are in positive territory except for the small-cap Russell 2000, which is down 2.5%. #-ad_banner-#Despite the strong showing from the Nasdaq 100, the three strongest sectors last week were all defensive ones: utilities (+2.4%), consumer staples (+1.7%) and health care (+1.3%). This suggests investor apprehension that, should it continue, may lead into an overdue corrective decline later this… Read More

All major U.S. indices finished last week in positive territory, led by the Nasdaq 100. This is a positive near-term factor for the overall market because technology stocks typically lead the broader market both higher and lower. For 2014, all major indices are in positive territory except for the small-cap Russell 2000, which is down 2.5%. #-ad_banner-#Despite the strong showing from the Nasdaq 100, the three strongest sectors last week were all defensive ones: utilities (+2.4%), consumer staples (+1.7%) and health care (+1.3%). This suggests investor apprehension that, should it continue, may lead into an overdue corrective decline later this summer. Russell 2000, Google Still Key to Market Direction In the May 19 Market Outlook, I pointed out that the Russell 2000 had just tested and held major support at 1,083, saying, “As long as the Russell remains above it this week, I would view this level as a potential springboard for a new leg higher in the overall market.”   The index has since risen as expected, by about 6% into last week’s highs. The benchmark S&P 500 has risen by 3% to new all-time highs during that time. The chart shows the Russell… Read More

All major U.S. indices were higher last week, led by the previously downtrodden Nasdaq 100 (+2.5%) and Russell 2000 (+2.1%). Both of these market-leading indices must continue to outperform the broad market S&P 500 if last week’s strength is going to become the next leg higher within the larger 2013 stock market advance. The major indices are now all in positive territory for 2014 except for the small-cap Russell 2000, which ended last week down 3.2% for the year. #-ad_banner-#From a sector standpoint, my own asset flow-based metric shows the largest inflow of investor assets over the past week went… Read More

All major U.S. indices were higher last week, led by the previously downtrodden Nasdaq 100 (+2.5%) and Russell 2000 (+2.1%). Both of these market-leading indices must continue to outperform the broad market S&P 500 if last week’s strength is going to become the next leg higher within the larger 2013 stock market advance. The major indices are now all in positive territory for 2014 except for the small-cap Russell 2000, which ended last week down 3.2% for the year. #-ad_banner-#From a sector standpoint, my own asset flow-based metric shows the largest inflow of investor assets over the past week went into consumer discretionary, which led all sectors with a 2.1% gain. The utilities sector had the biggest outflow of investor assets and, as would be expected, was the only sector to lose ground for the week. Is Technology Leading the Blue-Chip Stocks Higher? Beginning in the April 21 Market Outlook, and again in several subsequent issues, I have been discussing overhead resistance at 3,617 on the Nasdaq 100 and stating that a rise above this level was necessary to indicate that this market-leading technology index’s larger November 2012 advance was resuming.  After negotiating this… Read More

There are so many issues to ponder about the proposed link-up between AT&T (NYSE: T) and DirecTV (NYSE: DTV) that it’s hard to know where to begin. But let’s start with short sellers.  #-ad_banner-#For nearly a year now, a growing number of investors have become convinced that steady-as-she-goes AT&T was drifting into oblivion. By the middle of April, the short position in this stock had reached 197 million.  Though the short position shrank by 12 million two weeks later, AT&T was still the most heavily shorted stock on the New York Stock Exchange — by a very wide margin. (AMD… Read More

There are so many issues to ponder about the proposed link-up between AT&T (NYSE: T) and DirecTV (NYSE: DTV) that it’s hard to know where to begin. But let’s start with short sellers.  #-ad_banner-#For nearly a year now, a growing number of investors have become convinced that steady-as-she-goes AT&T was drifting into oblivion. By the middle of April, the short position in this stock had reached 197 million.  Though the short position shrank by 12 million two weeks later, AT&T was still the most heavily shorted stock on the New York Stock Exchange — by a very wide margin. (AMD (NYSE: AMD) is next at 115 million shares.) One of the key concerns for shorts: AT&T’s inability to sustain its dividend. I looked into AT&T’s myriad challenges two months ago, noting that “simply maintaining the dividend will eventually push the payout ratio above 100%.” In announcing the deal, AT&T’s management was quick to suggest that DirecTV’s impressive cash flow will help AT&T support its dividend (currently yielding 5%).  DirecTV generates around $8 billion a year in EBITDA (earnings before interest, taxes, depreciation and amortization), and a little less than $7 billion after interest expenses are covered. DirecTV also spends more… Read More