Scott Martindaleby Scott Martindale
President, Sabrient Systems LLC

The month of May turned out to be pretty decent for stocks overall, with the S&P 500 large caps up about +2%, with growth greatly outperforming value, and June has got off to a good start, as well. But the smaller caps were the bigger stars, as I have been predicting for several months, with the S&P 600 small caps up +6% for the month. Even after a volatile April, and even though the headlines on trade wars, oil prices, Iran, North Korea, Venezuela, Italy, et al were confusing if not frightful, and even though technical signals suggested overbought conditions and a likely pullback, investors have been reluctant to sell their equities and the late-month pullback was fleeting.

Nevertheless, many commentators are offering up lots of reasons why further upside is limited and stocks likely will turn tail into a downtrend, including political contagion in the EU, the US dollar strengthening too much such that overseas corporate profits take a hit, and yields rising too quickly such that they 1) burden a heavily-leveraged economy and 2) suppress stock prices by spiking the risk-free rate used in a discounted cash flow analysis. But I think the main thing weighing on investors’ minds right now is fear that things are “as good as it gets” when it comes to synchronized global growth, monetary and fiscal stimulus, and year-over-year growth in corporate earnings. In other words, now that the hope and optimism for strong growth actually has materialized into reality, there is nothing more to look forward to, so to speak. The year-over-year EPS comparisons won’t be so eye-popping. Earnings growth inevitably will slow, higher interest rates will suppress valuations, and P/E compression will set in.

However, recall that the so-called “taper tantrum” a few years ago led to similar investor behavior, but then eventually cooler heads prevailed as investors realized that the fundamental picture was strong and in fact extraordinary monetary accommodation was no longer necessary (or even desirable). Similarly, I think there is still plenty of fuel in the tank from tax reform, deregulation, and new corporate and government spending plans, offering up the potential to drive strong growth for at least the next few years (e.g., through revived capex, onshoring of overseas capital and operations, and M&A).

In this periodic update, I provide a market commentary, offer my technical analysis of the S&P 500, review Sabrient’s latest fundamentals-based SectorCast rankings of the ten US business sectors, and serve up some actionable ETF trading ideas. In summary, our sector rankings still look bullish, while the sector rotation model takes a bullish posture as stocks try to break out.

By the way, in response to popular demand, Sabrient is launching this week our first International Opportunity portfolio comprising 30-35 stocks from non-US developed markets (e.g., Canada, Western Europe, Australasia, Far East) based on the same “quantamental” growth-at-reasonable-price (GARP) portfolio construction process used for our Baker’s Dozen portfolios, including the in-depth earnings quality review and final vetting by our wholly-owned forensic accounting subsidiary Gradient Analytics. In addition, we are nearing two years since the inception of our Sabrient Select actively-managed strategy, a 30-stock all-cap GARP portfolio that is available for investment as a separately managed account (SMA) through a dual-contract arrangement. (Please contact me directly if you would like to learn more about this.) Read on.... Read more about Sector Detector: Fundamental strength overcomes new macro worries as Tech and small caps lead

Of course, all eyes have been on Greece in an ongoing saga that, although critical to the Greeks, is mostly just an annoying distraction for global investors -- partly because it has been going on for so many years, with the proverbial can of inevitability continually being kicked down the road, and partly because there can be no winners in this intractable situation. Read more about Sector Detector: Bulls prepare for a new buying opportunity, courtesy of Greece

Scott MartindaleLast week, I talked about the impressive strength this year in the Dow Jones Transportation Average, but it since has been hit by investors’ renewed worries about global economic growth and financial stability. Its fall has been led by weakness in the airlines. Read more about Sector Detector: Skittishness neutralizes bullish conviction

smartindale / Tag: iShares, sectors, ETF, SPY, XHB, IYT, VIX, iyw, IYK, IYF, IDU, IYH, IYJ, IYE, IYM, IYZ, IYC, FFIV, SWI, NVR, PII / 0 Comments

With European markets closed for Easter on Monday and Asia soured by poor economic reports from both China and Japan, it was up to the domestic ISM report and the Construction Spending reports to give the market a boost. Read more about What the Market Wants: ISM Leads Market Down Bearish Path

david / Tag: APO, JAZZ, SNTS, XHB / 0 Comments

“It's not wise to violate rules until you know how to observe them.” -- T.S. Elliot

For the majority of 2012, the market has been acting like a fairly reasonable creature, as opposed to the nervous and jittery beast that dominated Wall Street for the second half of 2011. Read more about ETF Periscope: Low-Level “Fear Gauge” Makes VXX A Sweet Pairs Partner

daniel / Tag: DJIA, EU, LTFO, SPX, VIX, VXX Eurozone, XHB / 0 Comments

Rude Crude and the Fear Index

by Daniel Sckolnik of ETF Periscope

“If you want to conquer fear, don't sit home and think about it. Go out and get busy.” ~  Dale Carnegie Read more about ETF Periscope: Rude Crude and the Fear Index

daniel / Tag: CBOE, COMP, DJIA, Dow Jones Industrial Average, ETF, IYZ, Nasdaq Composite Index, S&P, SPX, USO, VIX, VXX, XHB, XLK, xlv / 0 Comments

Oil Barrels Back Towards the Century Mark

by Daniel Sckolnik of ETF Periscope

“Two things are infinite: the universe and human stupidity; and I'm not sure about the universe.-- Albert Einstein

Read more about ETF Periscope: Oil Barrels Back Towards the Century Mark

daniel / Tag: DJIA, Dow Jones Industrial Average, IYZ, USO, XHB, XLK, xlv / 0 Comments

Fed Up and Fed Down

by Daniel Sckolnik of ETF Periscope

If you do not change direction, you may end up where you are heading.”  ~Lao Tzu Read more about ETF Periscope: Fed Up and Fed Down

daniel / Tag: BERNANKE, FED, FXH, GDX, IYG, XHB / 0 Comments