Since the last report about a month ago, the market has continued to go pretty steadily upward, making gains in 13 of the past 16 weeks through last Friday. Click on the chart to enlarge it.
The Timing Outlook remains elevated at 9.5. As last time, the only indicator that is neutral instead of positive is Morningstar’s Market Valuation Graph. Every other indicator is positive.
My Capital Gains Portfolio remains 100% invested in SPY, an index-tracking ETF. As explained in previous posts, most of my time recently has been devoted to working on the 2011 edition of TOP 40 DIVIDEND STOCKS, which I published on January 14. So I have not had time to evaluate individual stocks for the Capital Gains portfolio. The SPY shares are protected by a tight 5.5% trailing sell-stop. Incidentally, you may notice on the chart several red “down” days recently and be wondering why that is not a “sell” signal since it fails my 2/3 up-days requirement. The answer is that once the money is invested, any selling is determined by the sell-stop, not by the original entry requirements.
The rally is the kind I like—steady with little volatility. That makes it an easy trend to identify and to stay with. My confidence in the rally has improved as the trend has lengthened, but of course the 5.5% sell-stop represent my respect for the risk that any trend can reverse at any time.
My Dividend Growth Portfolio, as usual, is 100% invested. I accumulated enough dividends in early January to reinvest them, and I used the opportunity to pick up 20 more shares in Abbott Labs. If you are interested in learning more about TOP 40 DIVIDEND STOCKS FOR 2011, click here. The description page for this annual e-book has been completely updated on my website for the new edition.
2. Market Performance Since Last Outlook
(“now” figures are as of mid-day Monday January 24, 2011)
Last Outlook (12/4/10): 9.5 (positive)
S&P 500 last time (12/4/10): 1259
S&P 500 now: 1287 Change: +2%
S&P 500 at beginning of 2011: 1258
S&P 500 now: 1287 Change in 2011: +2%
S&P 500 at close 3/9/09 (beginning of bull market): 677
S&P 500 now: 1287 Change since 3/9/09: +90% (in about 23 months)
3. Indicators in Detail
• Conference Board Index of Leading Economic Indicators: January’s report, out last week, showed another increase, the 6th in a row. That keeps this indicator positive. +10
• Fed Funds Rate: No change. The Fed continues to be clearly committed to a loose money policy until the economy is well into recovery or they become concerned with inflation. Positive. +10
• S&P 500 Market Valuation (P/E): Morningstar pegs the current operating P/E of the S&P 500 at 15.5, up just slightly from 14.7 last time. This is well within positive territory (any value below 17.4). +10
• Morningstar’s Market Valuation Graph. Morningstar’s market valuation graph is at 1.04, down from 1.05 last time, continuing to suggest that the market is slightly overvalued right now. This is still well within my +/- 10% range of 1.00 for calling this indicator neutral. +5
• S&P 500 Short Term Technical Trend: All of the technical indicators are in the same configuration as last time. On the chart above, the 20-day simple moving average (SMA) is the green line, the 50-day is the blue line, and the 200-day is the red line. The short-term technical indicators use the two shorter (20-day and 50-day) simple moving averages (SMAs) of each index, and the current lineups are the best you can get: Index > 20-day > 50-day. +10
• S&P 500 Medium Term Technical Trend: The medium-term technical indicators use the two longer SMAs (50-day and 200-day) for each index. Right now all three indexes tell the same story: Index > 50-day >200-day. Positive. +10
• DJIA Short Term Technical Trend: Positive. +10
• DJIA Medium Term Technical Trend: Positive. +10
• NASDAQ Short Term Technical Trend: Positive. +10
• NASDAQ Medium Term Technical Trend: Positive. +10
TOTAL POINTS: 95
NEW READING: 95 / 10 = 9.5 = POSITIVE
