1. Summary
The Timing Outlook remains at 9.0, which is a strong positive reading.
As regular readers know, I have been tracking weekly movements in the market this way: P = positive week, N = negative week, and 0 = no change (less than ½ of 1%).
Here is what the market has done in 2010: P-N-N-N-N-P-P-0-P-P-P-P-P-P-0. That’s 9 up weeks, 4 down weeks, and 2 with negligible change. Netted out, the market is up 7% in 2010 and 76% since March 2009’s lowest point. In other words, we have had a 13-month bull market with a nearly uninterrupted 76% rise. This has been one of the best stock investment opportunities in a generation.
The new earnings season kicked off last week. Thirty-seven US companies reported earnings; 73% of them beat consensus earnings expectations and 79% beat revenue expectations. The big star was Intel (INTC), which beat on both earnings and revenue and also raised its guidance for the yearr.
The earnings season will hit full stride next week, with more than 100 of the S&P 500’s companies reporting. Financial companies will be in the spotlight with Citigroup (C), Goldman Sachs (GS), Wells Fargo (WFC), Capital One (COF), American Express (AXP), Travelers (TRV), and many others reporting.
Goldman Sachs, of course, hit the newswires in a major way at the end of last week, charged by the SEC with fraudulent marketing of mortgage-backed securities. That helped lead to a 13% drop in GS on Friday. It also fueled a selling binge that brought the major indices down more than 1% each on Friday, knocking out what would have been the 7th consecutive positive week for the indices.
The AP had an article on Saturday that the SEC’s action could “unleash a torrent of lawsuits.” That may not be good news for stock investors, as traditionally, Wall St. hates uncertainty, and lawsuits create uncertainty. Perhaps the damage will be confined to the large banks, but it spread across all sectors on Friday.
In addition to the financials, other notable companies scheduled to report this coming week include IBM (IBM), Apple (AAPL), Coca-Cola (KO), Johnson & Johnson (JNJ), United Technologies (UTX), Microsoft (MSFT), Amazon.com (AMZN), and Verizon (VZ).
As reported last time, my Capital Gains Portfolio is fully invested, protected to the downside with 6% sell-stops. Check out its holdings and performance by clicking here.
My Dividend Portfolio does not utilize timing or sell-stops. It has a long-term strategy, contains only dividend-paying stocks, and employs a buy-and-monitor approach for risk control. Use this link to view its holdings and performance. For a description of the book on which the Dividend Portfolio is based, go to this page to read about THE TOP 40 DIVIDEND STOCKS FOR 2010: How to Generate Wealth or Income from Dividend Stocks.
2. Market Performance Since Last Outlook
(“now” figures are as of close Friday April 16, 2010)
Last Outlook (4/7/10): 9.0 (positive)
S&P 500 last time (4/7/10): 1182
S&P 500 now: 1192 Change: +1%
S&P 500 at beginning of 2010: 1115
S&P 500 now: 1192 Change in 2010: +7%
S&P 500 at close 3/9/09 (beginning of bull market): 677
S&P 500 now: 1192 Change since 3/9/09: +76%
3. Indicators in Detail
• Conference Board Index of Leading Economic Indicators: No new report since last time. The next report is due on Monday. The previous report registered this index’s 11th consecutive monthly increase. I give full credit for three positive reports in a row. +10
• Fed Funds Rate: The Fed Funds rate remains unchanged, near zero, so this indicator stays positive. The next Fed meeting is at the end of the month. From the public statements of Chairman Ben Bernanke, the Fed is expected to keep interest rates at rock-bottom levels for awhile. I expect the Fed will adhere to this position as long as the economic recovery remains slow and inflation remains low. Positive. +10
• S&P 500 Market Valuation (P/E): Morningstar shows the current P/E of the S&P 500 based on operating earnings as 20.0, up from 19.6 last time, but still in the fairly valued, neutral zone. +5
• Morningstar’s Market Valuation Graph. This indicator has been slowly climbing along with the market since mid-February, while staying within the “fairly valued” band of 0.9 to 1.1. It currently stands at 1.07, unchanged from last time. Neutral. +5
• S&P 500 Short Term Technical Trend: The charts of all three major indices (S&P 500, Dow Jones Industrial, and NASDAQ) have stayed in the same favorable configuration since early March. That favorable picture shows, for each index, Index > 20-day SMA > 50-day SMA > 200-day SMA, where SMA stands for Simple Moving Average. This short-term technical indicator uses the S&P’s relationship with its 20-day and 50-day SMAs. The relationship is positive, with the index above the 20-day SMA, which is above the 50-day SMA. +10
• S&P 500 Medium Term Technical Trend: This mid-term indicator uses the index plus the 50-day and 200-day SMAs. It remains positive, with the index above the 50-day SMA, which is above the 200-day SMA. +10
• DJIA Short Term Technical Trend: As stated above, the DJIA’s chart looks like the S&P 500’s chart. Positive. +10
• DJIA Medium Term Technical Trend: Positive. +10
• NASDAQ Short Term Technical Trend: The NASDAQ’s chart looks like the other two. Positive. +10
• NASDAQ Medium Term Technical Trend: Positive. +10
TOTAL POINTS: 90 NEW READING: 90 / 10 = 9.0 = POSITIVE
Sunday, April 18, 2010
Wednesday, April 7, 2010
Timing Outlook Stays Positive at 9.0
1. Summary
After falling a single time to a negative value eight weeks ago, the Timing Outlook rose steadily, along with the market, to 9.0 last time, where it remains today. On the scale of 0-10, 9.0 is a very positive reading.
At the beginning of the year, I began noting weekly movements in the market, using this system of nomenclature: P = positive week, N = negative week, and 0 = no change. Here is what the market has done in 2010: P-N-N-N-N-P-P-0-P-P-P-P-P. That’s 5 consecutive up weeks (as of last Friday, April 1), and 7 of the last 8 weeks have been up. Overall, the year shows 8 P’s, 4 N’s, and a 0. The market went up 3% in the first week of the year, then fell 7% over the next 4 weeks. Since then (starting in early February), it has rallied 11%. Netted out for the year, the market is up 6% in 2010 and 75% since last March’s lowest point.
A new earnings season kicks off next week. This will be referred to as the Q2 earnings season, with companies reporting on Q1 results for the quarter that just ended on March 31. As discussed last time, the Q1 earnings season (with companies reporting on their final-quarter results from 2009) was excellent, with about 80% of companies beating earnings and revenue expectations, and year-over-year earnings and revenue changes for many companies turning positive.
In my own Capital Gains Portfolio, I have fully re-invested all of its cash after the 4-week down-trend (N-N-N-N) of January and early February caused my sell-stops to be hit. I just updated my Web site for April, so you can go here if you want to see the Portfolio’s performance through the end of March. As always, holdings in the Capital Gains portfolio are protected to the downside by sell stops, currently set at 6%. Since its inception, the Capital Gains Portfolio is far ahead of the S&P 500.
For a portfolio that does not utilize timing or sell-stops, but rather uses dividend-paying stocks and a buy-and-monitor approach, use the same link above to check out my Dividend Portfolio. For a description of the book on which the Dividend Portfolio is based, go to this page to read about THE TOP 40 DIVIDEND STOCKS FOR 2010: How to Generate Wealth or Income from Dividend Stocks. The e-book has been on a record sales pace since its release in January, with some readers reporting that they have purchased it all three years, and that it has helped them initiate or improve a dividend portfolio of their own.
2. Market Performance Since Last Outlook
(“now” figures are as of close Wednesday 4/7/10)
Last Outlook (3/21/10): 9.0 (positive)
S&P 500 last time (3/21/10): 1160
S&P 500 now: 1182 Change: +2%
S&P 500 at beginning of 2010: 1115
S&P 500 now: 1182 Change in 2010: +6%
S&P 500 at close 3/9/09: 677 (bottom of bear market and beginning of bull market)
S&P 500 now: 1182 Change since 3/9/09: +75%
3. Indicators in Detail
• Conference Board Index of Leading Economic Indicators: No new report since last time. That report showed the 11th consecutive monthly increase. The string of increases suggests an improving economy, which is usually good for the stock market. Positive. +10
• Fed Funds Rate: No change. The Fed Funds rate remains near zero, so this indicator stays positive. +10
• S&P 500 Market Valuation (P/E): Morningstar shows the current P/E of the S&P 500 based on operating earnings as 19.6, up slightly from 19.3 last time, still in the fairly valued, neutral zone. +5
• Morningstar’s Market Valuation Graph: This indicator has been slowly climbing along with the market since mid-February, while staying within the “fairly valued” band of 0.9 to 1.1. It currently stands at 1.07, up from 1.05 last time and 1.04 the time before that. Neutral. +5
• S&P 500 Short Term Technical Trend: The charts of all three indexes that I use (S&P 500, Dow Jones Industrial, and NASDAQ) have stayed in the same favorable configuration since last time: Index > 20-day SMA > 50-day SMA > 200-day SMA. This short-term technical indicator uses the index’s relationship with the 20-day and 50-day simple moving averages (SMA). The relationship is positive, with the index above the 20-day SMA, which is above the 50-day SMA. +10
• S&P 500 Medium Term Technical Trend: This medium-term indicator compares the index to its 50-day and 200-day SMAs. It remains positive, with the index above the 50-day SMA, which is above the 200-day SMA. +10
• DJIA Short Term Technical Trend: Positive. +10
• DJIA Medium Term Technical Trend: Positive. +10
TOTAL POINTS: 90 NEW READING: 90 / 10 = 9.0 = POSITIVE
After falling a single time to a negative value eight weeks ago, the Timing Outlook rose steadily, along with the market, to 9.0 last time, where it remains today. On the scale of 0-10, 9.0 is a very positive reading.
At the beginning of the year, I began noting weekly movements in the market, using this system of nomenclature: P = positive week, N = negative week, and 0 = no change. Here is what the market has done in 2010: P-N-N-N-N-P-P-0-P-P-P-P-P. That’s 5 consecutive up weeks (as of last Friday, April 1), and 7 of the last 8 weeks have been up. Overall, the year shows 8 P’s, 4 N’s, and a 0. The market went up 3% in the first week of the year, then fell 7% over the next 4 weeks. Since then (starting in early February), it has rallied 11%. Netted out for the year, the market is up 6% in 2010 and 75% since last March’s lowest point.
A new earnings season kicks off next week. This will be referred to as the Q2 earnings season, with companies reporting on Q1 results for the quarter that just ended on March 31. As discussed last time, the Q1 earnings season (with companies reporting on their final-quarter results from 2009) was excellent, with about 80% of companies beating earnings and revenue expectations, and year-over-year earnings and revenue changes for many companies turning positive.
In my own Capital Gains Portfolio, I have fully re-invested all of its cash after the 4-week down-trend (N-N-N-N) of January and early February caused my sell-stops to be hit. I just updated my Web site for April, so you can go here if you want to see the Portfolio’s performance through the end of March. As always, holdings in the Capital Gains portfolio are protected to the downside by sell stops, currently set at 6%. Since its inception, the Capital Gains Portfolio is far ahead of the S&P 500.
For a portfolio that does not utilize timing or sell-stops, but rather uses dividend-paying stocks and a buy-and-monitor approach, use the same link above to check out my Dividend Portfolio. For a description of the book on which the Dividend Portfolio is based, go to this page to read about THE TOP 40 DIVIDEND STOCKS FOR 2010: How to Generate Wealth or Income from Dividend Stocks. The e-book has been on a record sales pace since its release in January, with some readers reporting that they have purchased it all three years, and that it has helped them initiate or improve a dividend portfolio of their own.
2. Market Performance Since Last Outlook
(“now” figures are as of close Wednesday 4/7/10)
Last Outlook (3/21/10): 9.0 (positive)
S&P 500 last time (3/21/10): 1160
S&P 500 now: 1182 Change: +2%
S&P 500 at beginning of 2010: 1115
S&P 500 now: 1182 Change in 2010: +6%
S&P 500 at close 3/9/09: 677 (bottom of bear market and beginning of bull market)
S&P 500 now: 1182 Change since 3/9/09: +75%
3. Indicators in Detail
• Conference Board Index of Leading Economic Indicators: No new report since last time. That report showed the 11th consecutive monthly increase. The string of increases suggests an improving economy, which is usually good for the stock market. Positive. +10
• Fed Funds Rate: No change. The Fed Funds rate remains near zero, so this indicator stays positive. +10
• S&P 500 Market Valuation (P/E): Morningstar shows the current P/E of the S&P 500 based on operating earnings as 19.6, up slightly from 19.3 last time, still in the fairly valued, neutral zone. +5
• Morningstar’s Market Valuation Graph: This indicator has been slowly climbing along with the market since mid-February, while staying within the “fairly valued” band of 0.9 to 1.1. It currently stands at 1.07, up from 1.05 last time and 1.04 the time before that. Neutral. +5
• S&P 500 Short Term Technical Trend: The charts of all three indexes that I use (S&P 500, Dow Jones Industrial, and NASDAQ) have stayed in the same favorable configuration since last time: Index > 20-day SMA > 50-day SMA > 200-day SMA. This short-term technical indicator uses the index’s relationship with the 20-day and 50-day simple moving averages (SMA). The relationship is positive, with the index above the 20-day SMA, which is above the 50-day SMA. +10
• S&P 500 Medium Term Technical Trend: This medium-term indicator compares the index to its 50-day and 200-day SMAs. It remains positive, with the index above the 50-day SMA, which is above the 200-day SMA. +10
• DJIA Short Term Technical Trend: Positive. +10
• DJIA Medium Term Technical Trend: Positive. +10
- NASDAQ Short Term Technical Trend: Positive. +10
TOTAL POINTS: 90 NEW READING: 90 / 10 = 9.0 = POSITIVE
Thursday, April 1, 2010
Why I Don't Day-Trade
Day traders think in time-frames of seconds, minutes, hours. They often close out all their positions each night and start over again the next day. Day trading requires constant attention, because every short time span is significant. Miss a minute, you may miss the chance of a lifetime.
I read lots of newsletters and blogs just to keep up with the stock investing field. One of them is called Daily Trader's Alert, written by Sam Collins, a technical expert at OptionsZone.com. The following is from his column yesterday (Wednesday, March 31).
Here's what caught my eye in the above quote:
But the other thing about that list is, it's all emotional. Stock investing should be emotion-less, a business. I instinctively resist treating the market as if it were a person, or a wayward child, or a bad dog that "needs a correction," gives you "anxious moments," and brings you to a point that you can't "take it anymore" and want to "throw in the towel." I resist the common metaphor of "Mr. Market," an OCD, ADHD, manic-depressive whose purpose in life is to fake you out and screw you over.
The market is just that, a market. It is a place for buying and selling, with thousands of individual stocks being traded (bought and sold) whenever the market is open. Every stock has its own set of buyers and sellers. The prices of individual stocks change all the time. The market sets a price for each stock through the process of trading. Each party to each transaction is trying to gain the greater return over whatever time-frame they are targeting.
No one can predict, with any consistency, the market's moment-to-moment or day-to-day movements. Those result from the interactions of thousands of people, some acting alone and some acting on behalf of institutions, all using different approaches, pursuing different agendas. Anyone who's ever sold a piece of furniture on Craigslist knows what I mean. Some buyers and sellers are rational people, some are not. Some make decisions based on incomprehensible logic. Some have their facts all wrong. In the stock market, some trades are made by computers which may have been programmed wrong.
If you widen out your time frame, market movements generally follow more predictable patterns...prices follow earnings, trends tend to continue (until they stop), that sort of thing.
Investing should be fun. Some of the decisions you make will be "wrong" in the sense that they don't work out, even though logic (your logic) says they "should."
Protect yourself against bad calls by not going all-in, hedging, using sell-stops, or conducting periodic Portfolio Reviews (the latter two are my preferred methods). But I won't put myself through the daily emotional wringer of the sort described above. It's not worth it, and more to the point, the emotions probably lead to more bad calls.
As they said in The Godfather, it's not personal, it's business.
I read lots of newsletters and blogs just to keep up with the stock investing field. One of them is called Daily Trader's Alert, written by Sam Collins, a technical expert at OptionsZone.com. The following is from his column yesterday (Wednesday, March 31).
As our readers know, I've remained cautiously bullish even as the major indices broke to new highs and our internal and sentiment indicators hovered at dangerous levels.
I've warned again and again of the "overbought" condition of the market and its need for a correction, and here is the tough part, while still riding the "long equities" train. Even though it's been a profitable ride for us, the resilience of the trend higher has provided this daily writer with some anxious moments.
Now one of the highest profile analysts and a renowned technician has publicly expressed his frustration with the market. I share with you part of what Mark Arbeter, chief technician of Standard and Poor's told subscribers yesterday:
"Quite frankly, we're tired of calling for a pullback that never comes, and this week, we turned our quote machine off on two different days, as we couldn't take it anymore. Many times when the monitor goes off and my mind wants to throw in the towel, we are close to an inflection point. It's just the opposite of the movie "Trading Places," when Mortimer Duke screamed, 'Turn those machines back on.'"
Here's what caught my eye in the above quote:
- Dangerous
- Need for a correction
- Anxious moments
- Frustration
- Tired
- Couldn't take it anymore
- Throw in the towel
But the other thing about that list is, it's all emotional. Stock investing should be emotion-less, a business. I instinctively resist treating the market as if it were a person, or a wayward child, or a bad dog that "needs a correction," gives you "anxious moments," and brings you to a point that you can't "take it anymore" and want to "throw in the towel." I resist the common metaphor of "Mr. Market," an OCD, ADHD, manic-depressive whose purpose in life is to fake you out and screw you over.
The market is just that, a market. It is a place for buying and selling, with thousands of individual stocks being traded (bought and sold) whenever the market is open. Every stock has its own set of buyers and sellers. The prices of individual stocks change all the time. The market sets a price for each stock through the process of trading. Each party to each transaction is trying to gain the greater return over whatever time-frame they are targeting.
No one can predict, with any consistency, the market's moment-to-moment or day-to-day movements. Those result from the interactions of thousands of people, some acting alone and some acting on behalf of institutions, all using different approaches, pursuing different agendas. Anyone who's ever sold a piece of furniture on Craigslist knows what I mean. Some buyers and sellers are rational people, some are not. Some make decisions based on incomprehensible logic. Some have their facts all wrong. In the stock market, some trades are made by computers which may have been programmed wrong.
If you widen out your time frame, market movements generally follow more predictable patterns...prices follow earnings, trends tend to continue (until they stop), that sort of thing.
Investing should be fun. Some of the decisions you make will be "wrong" in the sense that they don't work out, even though logic (your logic) says they "should."
Protect yourself against bad calls by not going all-in, hedging, using sell-stops, or conducting periodic Portfolio Reviews (the latter two are my preferred methods). But I won't put myself through the daily emotional wringer of the sort described above. It's not worth it, and more to the point, the emotions probably lead to more bad calls.
As they said in The Godfather, it's not personal, it's business.
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