The major U.S. indices posted modest gains last week, led by the Russell 2000, which rose 1.1%. Last week’s rally puts the small-cap index up 10.2% for 2016, which is by far the best year-to-date performance for any of “the majors.”  The mid-July breakout in the Russell 2000 continues to target a move to 1,400 — almost 12% above Friday’s close — that will remain valid as long as the late-June, post-Brexit lows are not broken. #-ad_banner-# Last week’s broad-based advance was once again led by the financial sector. The… Read More

The major U.S. indices posted modest gains last week, led by the Russell 2000, which rose 1.1%. Last week’s rally puts the small-cap index up 10.2% for 2016, which is by far the best year-to-date performance for any of “the majors.”  The mid-July breakout in the Russell 2000 continues to target a move to 1,400 — almost 12% above Friday’s close — that will remain valid as long as the late-June, post-Brexit lows are not broken. #-ad_banner-# Last week’s broad-based advance was once again led by the financial sector. The only sectors of the S&P 500 to post losses were health care, energy and consumer discretionary.  Lack Of Fear Keeping Stocks Afloat I first warned Market Outlook readers that near-term downside risk exceeded upside potential in the July 18 report, and I have continued to beat that drum ever since. Seven weeks later, the benchmark S&P 500 is essentially unchanged, up less than 1% and apparently still stuck in neutral.   There are a number of reasons why the rally has stalled, including historically low volatility according to the Volatility S&P 500 Index (VIX) and formidable overhead resistance at the… Read More

For the first time since 1999, all three major U.S. stock indices — the S&P 500, the Dow Jones Industrial Average, and the Nasdaq 100 — all closed at record-high levels on the same day, August 11. One component continues to be missing, however, especially for those who remember the late 1990s: the atmosphere of celebration.  But maybe that’s not so surprising, given that there are fewer people at the party.  According to a Gallup poll in April, only a little more than half of Americans said they had any money invested in the stock market. The 52% that did… Read More

For the first time since 1999, all three major U.S. stock indices — the S&P 500, the Dow Jones Industrial Average, and the Nasdaq 100 — all closed at record-high levels on the same day, August 11. One component continues to be missing, however, especially for those who remember the late 1990s: the atmosphere of celebration.  But maybe that’s not so surprising, given that there are fewer people at the party.  According to a Gallup poll in April, only a little more than half of Americans said they had any money invested in the stock market. The 52% that did fess up to owning stocks matched the lowest level in the 19-year history of Gallup’s survey. Here’s a look at the trend: Percentage of U.S. Adults Invested in the Stock Market   Source: Gallup   To be sure, many investors and potential and former investors remain spooked by the two vicious bear markets the past two decades, along with the psychological — and real — impact of the Great Recession in 2008-2009. Not exactly a confidence booster.  #-ad_banner-#Still, the beat goes on — many of us who have taken the plunge in recent years have… Read More

Federal Reserve Chairwoman Janet Yellen gave a speech in Jackson Hole, Wyoming, on Friday, saying that the central bank will likely raise short-term interest rates at least once by the end of the year. The first possible increase could be during the Fed’s policy meeting on Sept. 20-21. But according to the Wall Street Journal, any announcement will likely depend on the results of the Sept. 2 jobs report. If the data disappoint, then the door is still open for a possible rate hike in November or December. #-ad_banner-#From the Journal: “The Fed pushed rates to near zero in December… Read More

Federal Reserve Chairwoman Janet Yellen gave a speech in Jackson Hole, Wyoming, on Friday, saying that the central bank will likely raise short-term interest rates at least once by the end of the year. The first possible increase could be during the Fed’s policy meeting on Sept. 20-21. But according to the Wall Street Journal, any announcement will likely depend on the results of the Sept. 2 jobs report. If the data disappoint, then the door is still open for a possible rate hike in November or December. #-ad_banner-#From the Journal: “The Fed pushed rates to near zero in December 2008, kept them there for seven years and then nudged them up a quarter percentage point last December. Officials began the year expecting to raise rates four times in quarter-point increments but have delayed moving them because economic growth disappointed in the first half of the year and because they were uncertain about developments overseas and about the strength of the U.S. job market after some soft reports. Ms. Yellen said her worries had dissipated. ‘While economic growth has not been rapid, it has been sufficient to generate further improvement in the labor market,’ Ms. Yellen said. Broad measures of… Read More

All major U.S. indices closed lower last week, except for the small-cap Russell 2000. This followed two weeks of mostly sideways, non-directional trading. #-ad_banner-# The Nasdaq continues to negotiate its March 2000 tech-bubble highs amid historically low volatility. Both of these factors continue to warn of the broader market’s vulnerability to at least a minor pullback between now and the end of the third quarter.  Internally, the market may actually be more vulnerable than it looks. All sectors of the S&P 500 except for financials and technology finished in negative… Read More

All major U.S. indices closed lower last week, except for the small-cap Russell 2000. This followed two weeks of mostly sideways, non-directional trading. #-ad_banner-# The Nasdaq continues to negotiate its March 2000 tech-bubble highs amid historically low volatility. Both of these factors continue to warn of the broader market’s vulnerability to at least a minor pullback between now and the end of the third quarter.  Internally, the market may actually be more vulnerable than it looks. All sectors of the S&P 500 except for financials and technology finished in negative territory last week, led lower by utilities (-2.2%) and health care (-1.7%).  However, there is one potential bright spot. The table below, which displays Asbury Research’s metric for tracking investor asset flows in the State Street SPDR sector ETFs, shows that the largest inflows over the past one-week and one-month periods went into energy.   As long as these inflows into energy stocks continue, it bodes well for more strength from this economically sensitive sector, which, like materials and industrials, is correlated to the U.S. economy and the broader stock market. Seasonality Turns Negative In September For the… Read More

The U.S. stock market looked sluggish for the second consecutive week, with all major indices moving 1% or less. The best performer thus far in 2016 has been the small-cap Russell 2000, which closed last week up 8.9% year to date.  The two strongest sectors of the S&P 500 last week were energy (2.5%) and materials (1.2%). This is more evidence of the strength in the commodity space that I have been talking about since the first quarter. Of the 38 commodity-related ETFs that I track, only grains and solar remain in major downtrends, as defined by their… Read More

The U.S. stock market looked sluggish for the second consecutive week, with all major indices moving 1% or less. The best performer thus far in 2016 has been the small-cap Russell 2000, which closed last week up 8.9% year to date.  The two strongest sectors of the S&P 500 last week were energy (2.5%) and materials (1.2%). This is more evidence of the strength in the commodity space that I have been talking about since the first quarter. Of the 38 commodity-related ETFs that I track, only grains and solar remain in major downtrends, as defined by their 200-day moving averages. #-ad_banner-#​Where’s The Pullback? For the past several weeks, I have been warning of the stock market’s vulnerability to a pullback or correction before prices move appreciably higher. While the market hasn’t yet declined, it hasn’t moved meaningfully higher either. In the past month, the benchmark S&P 500 is up just 0.5%.   So, what’s holding the market up? In our first chart, we see that daily total net assets invested in the SPDR S&P 500 ETF (NYSE: SPY) have been above their 21-day moving average since July 1, indicating a trend of monthly expansion that my research… Read More

All major U.S. stock indices except the small-cap Russell 2000 posted a slight weekly gain. Despite last week’s poor showing, the Russell 2000 is actually leading the market higher this year, up 8.3% versus 6.9% for the benchmark S&P 500. #-ad_banner-# The week’s best-performing sectors were financials, which have benefitted from the recent rebound in long-term interest rates, and energy, thanks to oil’s rally from major underlying support near $41.  While I remain positive on the stock market between now and early next year, my research continues to warn that… Read More

All major U.S. stock indices except the small-cap Russell 2000 posted a slight weekly gain. Despite last week’s poor showing, the Russell 2000 is actually leading the market higher this year, up 8.3% versus 6.9% for the benchmark S&P 500. #-ad_banner-# The week’s best-performing sectors were financials, which have benefitted from the recent rebound in long-term interest rates, and energy, thanks to oil’s rally from major underlying support near $41.  While I remain positive on the stock market between now and early next year, my research continues to warn that near-term downside risk exceeds upside potential.  Another Major Obstacle For Market-Leading Technology In last week’s Market Outlook, I pointed out that the Nasdaq Composite had just posted its first weekly close above its 5,133 tech-bubble high. I said this boded well for a significant advance in the index over the next one to several quarters.  While the Composite managed another close above this important level on Friday, the chart below shows that its large-cap cousin, the Nasdaq 100, finished last week at 4,807, just below its corresponding high from March 2000 at 4,816. This… Read More

The U.S. stock market resumed its rally last week, following three weeks of mostly sideways price activity within a narrow range. Following a much-better-than-expected July jobs report on Friday, the benchmark S&P 500 powered to a new all-time closing high. #-ad_banner-#The tech-heavy Nasdaq 100, up 1.3%, and small-cap Russell 2000, up 0.9%, outperformed the broader market S&P 500, which added 0.4% for the week. At the sector level, last week’s advance was led by financial services (2.2%) and technology (1.3%). The traditionally defensive utilities sector was the worst-performing sector, off 2.7%. The common denominator between financials and utilities is that… Read More

The U.S. stock market resumed its rally last week, following three weeks of mostly sideways price activity within a narrow range. Following a much-better-than-expected July jobs report on Friday, the benchmark S&P 500 powered to a new all-time closing high. #-ad_banner-#The tech-heavy Nasdaq 100, up 1.3%, and small-cap Russell 2000, up 0.9%, outperformed the broader market S&P 500, which added 0.4% for the week. At the sector level, last week’s advance was led by financial services (2.2%) and technology (1.3%). The traditionally defensive utilities sector was the worst-performing sector, off 2.7%. The common denominator between financials and utilities is that both sectors are heavily influenced by U.S. interest rates. Strengthening financials and weakening utilities are characteristic of a market that’s expecting long-term interest rates to rise. I’ll talk about this in more detail later in the report, but before we dig deeper into the interest rate outlook, let’s look at what other indicators are saying about likely market movement. Volatility, Seasonality Still Warn Of A Correction Over the past few weeks, I have stated that near-term downside risk in the stock market exceeds upside potential for a number of reasons, including August and September seasonality (see last week’s report) and current… Read More

For as long as I can remember, presidential candidates, their surrogates and the news media have always proclaimed every election as “the most crucial in our nation’s history”. Incidentally, my presidential campaign cycle awareness dates back to 1972.  #-ad_banner-#While I agree that presidential elections are an important exercise, I’m hesitant to label every one of them “crucial”. Case in point: George H.W. Bush versus Michael Dukakis in 1988. I mean…seriously? 2016’s contest has been anything but ordinary and, no surprise, I’m starting to field phone calls from nervous clients about what course of action they should take as the general… Read More

For as long as I can remember, presidential candidates, their surrogates and the news media have always proclaimed every election as “the most crucial in our nation’s history”. Incidentally, my presidential campaign cycle awareness dates back to 1972.  #-ad_banner-#While I agree that presidential elections are an important exercise, I’m hesitant to label every one of them “crucial”. Case in point: George H.W. Bush versus Michael Dukakis in 1988. I mean…seriously? 2016’s contest has been anything but ordinary and, no surprise, I’m starting to field phone calls from nervous clients about what course of action they should take as the general election cycle picks up engine pressure.  So I decided to go back and look at the performance of the S&P 500 during the general election cycles going back to the 1992 race. I did not include the 2000 and 2008 race, as both were extraordinary in circumstance. In 2000 there was the Gore v. Bush controversy that dragged out the final outcome to December of that year, and in 2008 the Obama vs. McCain contest occured during the depths of the financial crisis. I hope you like charts. … Read More

The U.S. stock market cooled off a little this past week on the heels of four consecutive weekly gains. The tech-heavy Nasdaq 100 and small-cap Russell 2000 closed slightly higher, but the benchmark S&P 500 and blue-chip Dow Jones Industrial Average finished the week fractionally lower. #-ad_banner-# The S&P 500 has already risen 9.1% since its Brexit low, and my work now suggests downside risk may exceed upside potential in the near term. Technology was largely responsible for what little market strength there was last week, with the sector advancing… Read More

The U.S. stock market cooled off a little this past week on the heels of four consecutive weekly gains. The tech-heavy Nasdaq 100 and small-cap Russell 2000 closed slightly higher, but the benchmark S&P 500 and blue-chip Dow Jones Industrial Average finished the week fractionally lower. #-ad_banner-# The S&P 500 has already risen 9.1% since its Brexit low, and my work now suggests downside risk may exceed upside potential in the near term. Technology was largely responsible for what little market strength there was last week, with the sector advancing 1.4%. Consumer staples, energy and utilities were the worst-performing sectors. Asbury Research’s own ETF asset flows-based metric shows that the biggest inflow of sector bet-related investor dollars over the past one-month and three-month periods went into health care, which fueled the sector’s outperformance. Since its March 17 low, health care has gained 13.4% — more than double the broader market’s 6.5% gain. As long as these inflows of investor assets continue, I expect this trend to continue. Texas Instruments Crushes the Market In the July 11 Market Outlook, I pointed out a bullish breakout in technology bellwether Texas… Read More

Last week, the major U.S. stock indices posted their fourth consecutive weekly gain. The rally was led by the tech-heavy Nasdaq 100, which advanced 1.7%, lifting this market-leading index further into positive territory for the year. From a sector standpoint, the rally was led by technology (1.8%) and utilities (1.5%), while energy (-1.3%) was the week’s big loser. #-ad_banner-# In last week’s report, I warned investors of a potential pullback in stocks in late July due to extremes in investor complacency that were apparent in both the Volatility S&P 500… Read More

Last week, the major U.S. stock indices posted their fourth consecutive weekly gain. The rally was led by the tech-heavy Nasdaq 100, which advanced 1.7%, lifting this market-leading index further into positive territory for the year. From a sector standpoint, the rally was led by technology (1.8%) and utilities (1.5%), while energy (-1.3%) was the week’s big loser. #-ad_banner-# In last week’s report, I warned investors of a potential pullback in stocks in late July due to extremes in investor complacency that were apparent in both the Volatility S&P 500 (VIX) and the CBOE Put/Call Ratio. These extremes indicated historically low market volatility and extremely low put volume relative to call volume. Both of these conditions remain heading into this week, so caution is still warranted. Watch Semis For Signs Of A Pullback Now that we know the market is vulnerable to a pullback, the next logical question is: Where is the pullback likely to start? This week’s first chart shows the PHLX Semiconductor (SOX) index closing in on a test of formidable overhead resistance at its 751 benchmark high from June 2015. That line is only 1.2% above Friday’s close. Read More