Scott MartindaleBy Scott Martindale
President, Sabrient Systems LLC

Another day, another new high in stocks. Some observers understandably think this is a sign of excessive complacency and a bad omen of an imminent major correction, as valuations continue to escalate without the normal pullbacks that keep the momentum traders under control and “shake out the weak holders,” as they say. But markets don’t necessarily need to sell off to correct such inefficiencies. Often, leadership just needs to rotate into other neglected segments, and that is precisely what has been happening since the mid-August pullback. Witness the recent leadership in small caps, transports, retailers, airlines, homebuilders, and value stocks, as opposed to the mega-cap technology-sector growth stocks that have been driving the market most of the year.

Yes, the cap-weighted Dow Industrials and S&P 500 have both notched their eighth straight positive quarter, and the Nasdaq achieved its fifth straight, and all of them are dominated by mega-cap stocks. And the new highs have just kept coming during the first week of October. But it’s the stunning strength in small caps that is most encouraging, as this indicates a healthy broadening of the market, in which investors “pick their spots” rather than just blindly ride the mega caps. Rising global GDP, strong economic reports, solid corporate earnings reports, and the real possibility of tax reform have all helped goose bullish sentiment.

Those of you who have read my articles or attended my live presentations on the road know that I have been positive on small caps and that the momentum trade so far this year and high valuations among the mega cap Tech stocks likely would become self-limiting, leading to a passing of the baton to other market segments that still display attractive multiples, particularly those that would benefit the most from any sort of new fiscal stimulus (including tax and regulatory reform), like small caps. Moreover, I believe that with a still-accommodative Federal Reserve moving cautiously on interest rates, and with strong global demand for US Treasuries and corporate bonds, the low-yield environment is likely to persist for the foreseeable future.

In this periodic update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart, review Sabrient’s latest fundamentals-based SectorCast rankings of the ten U.S. business sectors, and then offer up some actionable ETF trading ideas. In summary, our sector rankings still look bullish, while the sector rotation model also maintains its bullish bias, and the overall climate continues to look favorable for risk assets like equities. Although October historically has been a month that can bring a shock to the market, it also is on average one of the strongest months for stocks, and of course Q4 is seasonally a bullish period. Read on... Read more about Sector Detector: Optimism about tax reform gooses bullish sentiment

In a year in which stock prices mostly have been driven by news rather than fundamentals, three things stood out last week. First, terrorism has taken on an unsettling new face -- the stay-at-home mom down the street or your long-time co-worker at the plant -- as the dark side of the exponential growth in social media rears its ugly head (with something much more sinister than porn sites or online bullying). Second, with the strong jobs report on Friday, the Federal Reserve seems to have all their ducks in a row to justify the first fed funds rate hike in nine years. Read more about Sector Detector: Sector rotation model stays bullish, although fundamental rankings are still stuck in neutral

Bulls showed renewed backbone last week and drew a line in the sand for the bears, buying with gusto into weakness as I suggested they would. After all, this was the buying opportunity they had been waiting for. As if on cue, the start of the World Series launched the rapid market reversal and recovery. However, there is little chance that the rally will go straight up. Volatility is back, and I would look for prices to consolidate at this level before making an attempt to go higher. I still question whether the S&P 500 will ultimately achieve a new high before year end. Read more about Sector Detector: Bullish conviction returns, but market likely to consolidate its V-bottom

Wall Street continues to make summer investors smile as new highs in the major indices were touched on throughout the week. The benchmark S&P 500 Index (SPX) recorded a gain of 0.7% on the week, which puts it in the black for the year to the tune of 18.6%. The Dow Jones Industrial Average (DJIA) posted a small but solid 0.5%, while the Nasdaq (COMP) ended in positive territory by a slight 0.3%.

The past week’s gains may be slightly due to inertia, because it’s not exactly like there has been a plethora of positive economic news to support the record highs. It’s more like a dearth of bad news that has been the prime reason the equity market continues on the same merry uptrend that it’s been riding throughout most of 2013. Read more about ETF Periscope: A Good Time to Buy the Dip In China Equities? (Part 4)

daniel / Tag: DJIA, COMP, SPX, JPM, FXI, EWH, MCHI, GXC, HAO, PGJ, China, Shanghai Composite Index, G20 / 0 Comments

So far, July is looking pretty sweet for those investors who have decided to swap the pleasures of the beach for an extended Wall Street voyage through the summer.

For the moment at least, the market seems to be righting its ship after a fair amount of buffeting following Ben Bernanke’s comments regarding the Fed’s intention of tapering off its ambitious bond purchase program.

Apparently, investors have been comforted last week by his new and improved comments, the ones offering reassurance that the tapering isn’t quite as imminent as he first indicated, and that he is really, really advocating for continuing the money stimulus along its current trajectory. Read more about ETF Periscope: A Good Time to Buy the Dip in China Equities? (Part 3)

daniel / Tag: DJIA, COMP, SPX, JPM, FXI, EWH, MCHI, GXC, HAO, PGJ, FED, China, BERNANKE, Shanghai Composite Index / 0 Comments

OK, it’s earnings season again, though the first round of reports this week won’t reveal a whole lot, at least not until Friday, when J.P. Morgan (JPM) announces its Q2 results. Then, things could get interesting, as investors will decide if bottom-line fundamentals are enough to supersede the recent Fed hullaballoo that centered on the question of when, not if, the central bank would begin to taper its massive bond purchasing. Read more about ETF Periscope: A Good Time to Buy the Dip in China Equities? (Part 2)

daniel / Tag: DJIA, COMP, SPX, JPM, FXI, EWH, MCHI, GXC, HAO, PGJ, FED, China, earnings season / 0 Comments

The week started out well as insured depositors were spared in Cyprus, and that resonated well with investors.  Furthermore, last week’s domestic economic data was quite positive especially for housing.  The Philadelphia Fed Survey was much better than expected; Initial Jobless Claims remained in the low 300K area; and LEI were as expected. Read more about What the Market Wants: Recapitalization Scenarios

david / Tag: AAPL, JPM, LYB, KR, AMGN / 0 Comments

Earnings reports on Wednesday from big banks like Goldman Sachs (Scott MartindaleGS) and JPMorgan Chase (JPM) were encouraging. And Apple (AAPL) got a much-needed boost from the top tech analysts. However, Goldman’s analysts tried to throw a wet blanket on the markets earlier this week with their expectation that earnings reports overall this year would be “uninspiring” and that equity returns this year likely will be only in the single digits. Read more about Sector Detector: Bulls resist giving up any ground

smartindale / Tag: iShares, sectors, ETF, IYH, iyw, IYK, IYM, IYJ, IYE, IYF, IYZ, IDU, IYC, AAPL, GS, JPM, DVA, COO, CTSH, IT, SPY, VIX, DEF, NFO, KNOW, CSCO, FCX / 0 Comments

Scott MartindaleFive years ago this month, the S&P 500 hit all-time high of 1576. It closed Wednesday at 1461. Can the market make a run at that all-time high? Well, the biggest threat at the moment to bullish sentiment is the Fiscal Cliff, but both presidential candidates have a plan for dealing with it, and Congress is unlikely to want to take the fall for defying the new President and sending the country back into recession. Read more about Sector Detector: Stocks back in rally mode even without Tech leadership

smartindale / Tag: ETF, sectors, iShares, VIX, SPY, qqq, iyw, IYF, IYH, IYK, IYE, IYC, IYJ, IYM, IYZ, IDU, AAPL, GOOG, TRV, MA, QCOM, CVX, AA, YUM, WMT, BAC, C, JPM, INTC, IBM / 0 Comments

It is quite clear that the market wants good reports from the earnings announcements that begin this week. We make that judgment based on Friday’s weak close, despite a solid week of some of best economic news of the year that culminated with the drop in unemployment to 7.8% from the expected 8.2%. Read more about What the Market Wants: Fasten Your Money Belts

david / Tag: YUM, COST, JPM, WFC / 0 Comments

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