The major U.S. indices overcame early weakness last week to post across-the-board gains. The advance was led by the tech-heavy Nasdaq 100, which gained 2.9%, although the market-leading index is still down 7.3% for 2016. The rebound followed a successful test of underlying support at 1,821 in the benchmark S&P 500, which I discussed in last week’s Market Outlook. This is an important intermediate-term decision point for the broader market. From here a new one- or two-quarter advance should begin if the current decline is just a correction within a larger bull market. But I am not yet… Read More

The major U.S. indices overcame early weakness last week to post across-the-board gains. The advance was led by the tech-heavy Nasdaq 100, which gained 2.9%, although the market-leading index is still down 7.3% for 2016. The rebound followed a successful test of underlying support at 1,821 in the benchmark S&P 500, which I discussed in last week’s Market Outlook. This is an important intermediate-term decision point for the broader market. From here a new one- or two-quarter advance should begin if the current decline is just a correction within a larger bull market. But I am not yet convinced this is the case. #-ad_banner-# From a sector standpoint, last week’s rally was led by technology, which gained 2.6%. However, a look under the hood via Asbury Research’s investor asset flows-based metric shows the percentage of sector bet-related assets being invested in technology has actually been contracting since December. So, unless this quickly changes to a trend of expansion, the recent sector outperformance is likely to be short lived. Keep Support Must Hold Or Watch Out Below The chart below shows the S&P 500 testing and holding underlying support at 1,821 on Wednesday. It then rebounded… Read More

Shell shock from Asian exchanges continues to spread to the U.S. market.  On Wednesday, the Dow dropped 248 points to close below 15,800 and the broader S&P 500 lost more than 1%. That puts the index down nearly 10% for the year so far, and down just over 14% from the previous 52-week high that was set in May last year. The Volatility Index, which measures the market’s mood based on sophisticated traders’ positions in options contracts, has recently jumped to nearly 30, about twice its normal reading. #-ad_banner-#That’s a wrap-up of what you’ll hear on the financial channels.  And… Read More

Shell shock from Asian exchanges continues to spread to the U.S. market.  On Wednesday, the Dow dropped 248 points to close below 15,800 and the broader S&P 500 lost more than 1%. That puts the index down nearly 10% for the year so far, and down just over 14% from the previous 52-week high that was set in May last year. The Volatility Index, which measures the market’s mood based on sophisticated traders’ positions in options contracts, has recently jumped to nearly 30, about twice its normal reading. #-ad_banner-#That’s a wrap-up of what you’ll hear on the financial channels.  And that coverage misses the point. I’ve been sounding the alarm bell about China for a while now, and with such rampant uncertainty about the fallout — when and where it will end and how far it will fall — the global picture is probably going to get worse before it gets better.  But here’s what you need to keep in mind. Here is what no one else is going to mention… The mainstream financial media is there to broadcast a story. I’m here to temper their adrenaline with a little hyper-rationality.  A critical element of successful investing — and one… Read More

It’s official: we’re in correction territory. A correction is officially defined as when a stock or index declines by 10% or more. If we get a 20% dip, then it’s a full-blown bear market. There are a couple of culprits for the rocky start to 2016, but it essentially boils down to two things: 1) China is a mess — something we’ve touched on repeatedly here at StreetAuthority (see: this and this); 2) Oil prices continue to plummet (more on that in today’s issue). The current correction looks remarkably similar to the one we experienced last August. That was also largely blamed… Read More

It’s official: we’re in correction territory. A correction is officially defined as when a stock or index declines by 10% or more. If we get a 20% dip, then it’s a full-blown bear market. There are a couple of culprits for the rocky start to 2016, but it essentially boils down to two things: 1) China is a mess — something we’ve touched on repeatedly here at StreetAuthority (see: this and this); 2) Oil prices continue to plummet (more on that in today’s issue). The current correction looks remarkably similar to the one we experienced last August. That was also largely blamed on the same two factors: China and oil. As you can see in the chart above, the last time we saw a market correction, things eventually simmered down and share prices recovered.  Whether recent history repeats itself is anybody’s guess.  I know that may sound disconcerting to some of you. But I don’t believe in making hunches or predictions in order to mollify nervous readers. That’s simply not our style. Our job is to help make you a better investor and identify what we think are some of the best opportunities to profit along the way. #-ad_banner-#So what… Read More

The carnage on Wall Street continued last week. Stocks finished sharply lower, led by the small-cap Russell 2000, which lost 3.7% to end Friday down 11.3% for the year. Of the major indices, the S&P 500 shows the smallest year-to-date loss, off 8%. While there are a few reasons to believe the market may be approaching a meaningful bottom, I unfortunately do not see any tangible evidence suggesting one is in place. Until that happens, I will remain on the defensive. #-ad_banner-# From a sector standpoint, last week’s market weakness was led by materials, which lost… Read More

The carnage on Wall Street continued last week. Stocks finished sharply lower, led by the small-cap Russell 2000, which lost 3.7% to end Friday down 11.3% for the year. Of the major indices, the S&P 500 shows the smallest year-to-date loss, off 8%. While there are a few reasons to believe the market may be approaching a meaningful bottom, I unfortunately do not see any tangible evidence suggesting one is in place. Until that happens, I will remain on the defensive. #-ad_banner-# From a sector standpoint, last week’s market weakness was led by materials, which lost 4.5% compared to the S&P 500’s 2.2% decline.  The only sector of the S&P 500 to finish in positive territory for the week was defensive utilities, which gained 0.7%. As I’ve mentioned, the recent decline in long-term interest rates — which has been driven by a strong shift in investor assets back into the relative safety of U.S. Treasuries — has drawn yield-seeking investors back into riskier but better paying utilities. Retail Remains Vulnerable In last week’s Market Outlook, I said my work targeted a drop in the SPDR S&P Retail ETF (NYSE: XRT) to $40, and that its positive… Read More

When the Federal Reserve started raising rates in 1994, it drove interest rates up 2.5% in less than a year. The result was a bond market massacre that bled into stocks for a 3% loss on the year for the S&P 500.       There’s no question that the Fed needs to normalize rates right now after an historic easy money policy but the question is, how quickly will rates increase and should investors be worried about a repeat of 1994? #-ad_banner-#It’s a question that forced the market to a loss of 0.7% last year — and analysts… Read More

When the Federal Reserve started raising rates in 1994, it drove interest rates up 2.5% in less than a year. The result was a bond market massacre that bled into stocks for a 3% loss on the year for the S&P 500.       There’s no question that the Fed needs to normalize rates right now after an historic easy money policy but the question is, how quickly will rates increase and should investors be worried about a repeat of 1994? #-ad_banner-#It’s a question that forced the market to a loss of 0.7% last year — and analysts are predicting still higher rates through 2016. Against this fear in the market, there’s good reason to believe that rates aren’t going anywhere. If long-term rates stay low, it could be one of the biggest head-fakes of the year and lead to a huge rebound in rate-sensitive investments. Rates Go Up, Treasuries Fall? The Federal Reserve began its historic path to normalize rates after six years of easy money on December 16. Since that time, the rate on the 10-year Treasury has actually decreased by 0.15% rather than increased. Pundits will attribute the drop in rates to market volatility… Read More

In mid-December, I warned that although my intermediate-term outlook (one to two quarters) for the U.S. stock market was bullish, Market Outlook readers should consider adopting defensive strategies to protect assets in the short term. Following an ill-fated attempt at a Santa Claus rally, the weakness I was afraid of emerged with a vengeance last week. In fact, this year’s nasty stock market decline has already done so much technical damage that it calls my positive intermediate-term bias into question. ​#-ad_banner-#The S&P 500 collapsed by 122 points, or 6%, to its lowest level… Read More

In mid-December, I warned that although my intermediate-term outlook (one to two quarters) for the U.S. stock market was bullish, Market Outlook readers should consider adopting defensive strategies to protect assets in the short term. Following an ill-fated attempt at a Santa Claus rally, the weakness I was afraid of emerged with a vengeance last week. In fact, this year’s nasty stock market decline has already done so much technical damage that it calls my positive intermediate-term bias into question. ​#-ad_banner-#The S&P 500 collapsed by 122 points, or 6%, to its lowest level since early October, exceeding my initial downside target of 1,965. The market-leading Nasdaq 100 and Russell 2000, which represent the technology and small-cap spaces, fared even worse, declining 7% and 7.9%, respectively.   From a sector standpoint, last week’s broader market decline was led by financial services, which lost 8.7%. This was driven by a strong shift in investor assets back into the relative safety of U.S. Treasuries, which pushed long-term interest rates lower. Declining long-term interest rates eat into the profits of lending institutions.  The best-performing sector was utilities, which only lost 0.4%. The decline in long-term rates encouraged… Read More

The major U.S. stock market indices limped to the 2015 finish line with weekly losses, leaving all but the Nasdaq indices in negative territory for the year. The Nasdaq 100 added 8.4% in 2015 while the broader Composite index gained 5.7%.  The broader market S&P 500 was down 0.7% for the year and the Dow Jones Industrial Average fell 2.2%. It was the small-cap Russell 2000 that led the way lower, though, losing 5.7% in 2015.   From a sector standpoint, consumer discretionary was the year’s best performer, gaining 8.3%, followed by health care, which added 5.3%. At the other… Read More

The major U.S. stock market indices limped to the 2015 finish line with weekly losses, leaving all but the Nasdaq indices in negative territory for the year. The Nasdaq 100 added 8.4% in 2015 while the broader Composite index gained 5.7%.  The broader market S&P 500 was down 0.7% for the year and the Dow Jones Industrial Average fell 2.2%. It was the small-cap Russell 2000 that led the way lower, though, losing 5.7% in 2015.   From a sector standpoint, consumer discretionary was the year’s best performer, gaining 8.3%, followed by health care, which added 5.3%. At the other end of the spectrum, energy was by far the weakest sector, declining 23.8%, followed by materials and utilities, which lost 10.6% and 8.3%, respectively. Editor’s note: Despite the poor performance of most financial assets, one indicator pegged stocks that delivered gains of 55%, 60% and 88% in 2015. It also uncovered many of the best-performing stocks of 2014. And now it has found the Top 10 Trades for 2016. If you want the names and tickers, follow this link. #-ad_banner-# All things considered, 2015 was a tough year for investors… Read More

The past year was an eventful one for U.S. stocks, with volatility picking up considerably in August, China’s economic slowdown casting a long shadow and the Fed finally pulling the trigger on a long-telegraphed interest-rate hike. #-ad_banner-#What will 2016 bring? Here are six trends to watch: Interest rates. No one was surprised when the Fed increased the Fed Funds rate by 25 basis points (0.25 percentage points) in mid-December. Fed Chair Janet Yellen carefully telegraphed the increase for months, and better-than-expected jobs reports in the fall made it a near-certainty. What comes next is harder to predict, though an educated… Read More

The past year was an eventful one for U.S. stocks, with volatility picking up considerably in August, China’s economic slowdown casting a long shadow and the Fed finally pulling the trigger on a long-telegraphed interest-rate hike. #-ad_banner-#What will 2016 bring? Here are six trends to watch: Interest rates. No one was surprised when the Fed increased the Fed Funds rate by 25 basis points (0.25 percentage points) in mid-December. Fed Chair Janet Yellen carefully telegraphed the increase for months, and better-than-expected jobs reports in the fall made it a near-certainty. What comes next is harder to predict, though an educated guess isn’t too difficult: slow, gradual upticks in rates are the most likely course. My prediction is that Yellen & Company ease rates higher only once or twice in 2016, several months apart each time. Why? Despite low unemployment, the labor market clearly retains some slack, with historically high rates of non-participation and wages not keeping pace with productivity. And with energy prices still low (more on that later) and tepidly growing China unlikely to fuel an unexpected increase in global demand for commodities, inflation remains well under control. Some analysts are even calling for a recession to begin in… Read More

The world is on high alert for terror after the savage attacks in Paris that left 130 people dead and many others injured. This terrible act reminds us that there are more important things than money. Yet, I fear that terrorism itself is becoming a wild-card factor that all investors must weigh and consider. #-ad_banner-#Before Paris, ISIS claimed responsibility for taking down a Russian passenger jet returning from Egypt. Investigators combing through the wreckage discovered evidence of a bomb. And there has since been another attack within the past few days by al-Qaeda that left dozens dead at a Radisson… Read More

The world is on high alert for terror after the savage attacks in Paris that left 130 people dead and many others injured. This terrible act reminds us that there are more important things than money. Yet, I fear that terrorism itself is becoming a wild-card factor that all investors must weigh and consider. #-ad_banner-#Before Paris, ISIS claimed responsibility for taking down a Russian passenger jet returning from Egypt. Investigators combing through the wreckage discovered evidence of a bomb. And there has since been another attack within the past few days by al-Qaeda that left dozens dead at a Radisson Hotel in Mali. There have been other recent attacks in Nigeria, Denmark, Lebanon and Turkey. I don’t know what will happen in the days and weeks ahead. I would like to think that the worst is over. We all would. But common sense says otherwise. By all accounts this jihadi cancer is spreading, and it’s far more likely that the United States and other western nations will be drawn into further conflict. Normally, I would be talking to you about economic or financial matters today. To be sure, I’d much rather be discussing employment reports or factory orders. But my… Read More

Directionless volatility in the U.S. stock market continued during the holiday-shortened trading week, as all major indices closed sharply higher on the heels of two straight weeks of losses.  Last week ‘s surge higher was led by the downtrodden energy and materials sectors — the two worst performers of 2015. A rebound in oil prices and industrial and precious metals apparently provided hope that some economically influential commodities may have at least temporarily found a bottom. #-ad_banner-# Bigger picture, however, 2015 has been a lackluster to disappointing year for most individual sectors of the S&P 500. And when all was… Read More

Directionless volatility in the U.S. stock market continued during the holiday-shortened trading week, as all major indices closed sharply higher on the heels of two straight weeks of losses.  Last week ‘s surge higher was led by the downtrodden energy and materials sectors — the two worst performers of 2015. A rebound in oil prices and industrial and precious metals apparently provided hope that some economically influential commodities may have at least temporarily found a bottom. #-ad_banner-# Bigger picture, however, 2015 has been a lackluster to disappointing year for most individual sectors of the S&P 500. And when all was said and done, the broader market index ended last week right where it began its most recent bout of sideways, choppy behavior in late October. This indicates temporary investor indecision, which typically becomes the springboard for the next directional move.  In this week’s report, I will cover three charts that should help us determine whether that move will be up or down. Investor Fear Remains Key In last week’s Market Outlook, I pointed out that the Volatility S&P 500 index — better known as the VIX or fear gauge — had been above its 50-day moving average since Dec 10. Read More