Investors tend to give their portfolio half of the attention it needs. #-ad_banner-#They add stocks and funds to the mix, presumably making a commitment in dollar value that is commensurate with the perceived risk of any investment. But once an asset makes it into their portfolio, they don’t always actively monitor how the investment is faring — or how it fits in with the changing economy. Years may pass before you take a fresh, deep look at what you really own. I have met many investors who own a hundred stocks or more, simply because they could never know when… Read More

Investors tend to give their portfolio half of the attention it needs. #-ad_banner-#They add stocks and funds to the mix, presumably making a commitment in dollar value that is commensurate with the perceived risk of any investment. But once an asset makes it into their portfolio, they don’t always actively monitor how the investment is faring — or how it fits in with the changing economy. Years may pass before you take a fresh, deep look at what you really own. I have met many investors who own a hundred stocks or more, simply because they could never know when to sell any particular investment. Here’s a simple, four-step method to make sure your portfolio is in fighting shape. 1. Focus On Weightings It’s often wise to let your winners ride, especially if the news that propelled shares higher continues to flow. But your best portfolio picks can eventually start to account for an outsize portion of your portfolio. There’s no great rule of thumb about how much is too much, but generally speaking, any one holding that has come to represent 15% or 20% of your portfolio needs very close scrutiny. Unless you have done an… Read More

All major U.S. stock indexes closed higher for the week of March 17, led by the broad market S&P 500 (+1.4%) and Dow industrials (+1.5%). For the year, only the small-cap Russell 2000 (2.6%) and tech-laden Nasdaq 100 (1.7%) are positive. #-ad_banner-#Global stock markets were led lower by Russia and China. In the March 17 Market Outlook, I said I was expecting an additional decline of about 2% to 21,000 in China’s Hang Seng Index. Last week, the Hang Seng declined as expected, hitting a low of 21,137, and appears headed for a test of major support at 20,800. Heading… Read More

All major U.S. stock indexes closed higher for the week of March 17, led by the broad market S&P 500 (+1.4%) and Dow industrials (+1.5%). For the year, only the small-cap Russell 2000 (2.6%) and tech-laden Nasdaq 100 (1.7%) are positive. #-ad_banner-#Global stock markets were led lower by Russia and China. In the March 17 Market Outlook, I said I was expecting an additional decline of about 2% to 21,000 in China’s Hang Seng Index. Last week, the Hang Seng declined as expected, hitting a low of 21,137, and appears headed for a test of major support at 20,800. Heading into this week, the major European stock indexes are all situated just above major underlying support at their 200-day moving averages. This is where their larger cyclical uptrends should aggressively resume from, if still valid. Nasdaq 100: A Leading Indication of What To Expect This Week In my March 10 report, I said that momentum in the S&P 500 was still positive, but getting a bit frothy, indicating that the market was probably going to have increased difficulty continuing higher without a correction first. The U.S. broad market index is virtually unchanged since then. Last week, I pointed out… Read More

As you may have noticed, the stock market has sent investors on quite a ride already this year. #-ad_banner-#The market lost nearly 7% in just a couple of weeks between mid-January and early February, sparking fears that a sharp correction was imminent. Those fears have turned out to be a bit premature, as the market has since nearly recouped those losses. Hype and perception often have a more powerful effect than reality on short-term stock price movement. It may seem counterintuitive, but that’s the typical pattern. Of course, many other factors can cause stock prices to drop. Macroeconomic fears affect… Read More

As you may have noticed, the stock market has sent investors on quite a ride already this year. #-ad_banner-#The market lost nearly 7% in just a couple of weeks between mid-January and early February, sparking fears that a sharp correction was imminent. Those fears have turned out to be a bit premature, as the market has since nearly recouped those losses. Hype and perception often have a more powerful effect than reality on short-term stock price movement. It may seem counterintuitive, but that’s the typical pattern. Of course, many other factors can cause stock prices to drop. Macroeconomic fears affect the broad market in a negative way, and individual stocks can get knocked down for dozens of reasons: missed earnings estimates, poor quarterly results, negative rumors, management shenanigans, even simple profit-taking. The good news is that savvy investors can profit from this inevitable negative stock market action in three primary ways. 1. Shorting Shares The most popular way to profit from a down market or stock is through shorting. This means you place a trade in anticipation of the price falling rather than appreciating. I know it sounds complicated, but it’s actually quite easy. The way it works is, your… Read More

All major U.S. stock indices closed lower for the week of March 10, basically giving back all of the previous week’s gains. The market was led lower last week by the blue-chip Dow industrials, which lost 2.4%, leaving the Nasdaq and Russell 2000 as the only two major indices that are still in positive territory for 2014, up 1.7% and 1.5%, respectively, year to date.#-ad_banner-# U.S. stocks were particularly weak on Thursday, with the S&P 500 suffering its worst day since early February on rising tensions between Ukraine and Russia and concerns about a slowdown in China. Regarding the latter,… Read More

All major U.S. stock indices closed lower for the week of March 10, basically giving back all of the previous week’s gains. The market was led lower last week by the blue-chip Dow industrials, which lost 2.4%, leaving the Nasdaq and Russell 2000 as the only two major indices that are still in positive territory for 2014, up 1.7% and 1.5%, respectively, year to date.#-ad_banner-# U.S. stocks were particularly weak on Thursday, with the S&P 500 suffering its worst day since early February on rising tensions between Ukraine and Russia and concerns about a slowdown in China. Regarding the latter, I am expecting at least an additional 2.2% decline in China’s Hang Seng Index to 21,000. Dow Theory Non-Confirmation Persists In last week’s Market Outlook, I said, “The deeper that we go into 2014 without a confirming new high in the Dow, the more problematic it can eventually become from a Dow Theory standpoint.” As you can see in our first chart, the new 2014 closing high in the Dow transports set on March 7 of 7,592 versus the Jan. 23 high of 7,570 still has not been corroborated by a new high in the Dow industrials — and… Read More

In recent days, the financial press has been filled with stories regarding the fifth anniversary of the current bull market. The market bottom came in on March 9, 2009, and few would have guessed that the next half-decade would bring such terrific market action. #-ad_banner-#Yet March 9 also stands out to investors for another reason: Back on March 9, 2000, the Nasdaq Composite Index hit 5,000 for the first time ever. A few days later, the index went into freefall, eventually moving below 1,500 a few years later. (In a potentially eerie parallel, the Dow Jones Industrial Average has closed… Read More

In recent days, the financial press has been filled with stories regarding the fifth anniversary of the current bull market. The market bottom came in on March 9, 2009, and few would have guessed that the next half-decade would bring such terrific market action. #-ad_banner-#Yet March 9 also stands out to investors for another reason: Back on March 9, 2000, the Nasdaq Composite Index hit 5,000 for the first time ever. A few days later, the index went into freefall, eventually moving below 1,500 a few years later. (In a potentially eerie parallel, the Dow Jones Industrial Average has closed lower in each trading session since March 9, 2014.) The reason for the demise of the Nasdaq in general and dot-com stocks in particular back in 2000: Valuations had become disconnected from the fundamentals. There was simply no way to justify stock prices in the context of sales or profits, and many investments became known as “story stocks.” More than a decade removed from the dot-com bubble, it’s easy to forget that painful lesson. But you shouldn’t. This chart shows us that another bubble appears to have formed — and once again, it involves dot-com stocks. While the… Read More

All major U.S. stock indices closed higher for the week of March 7, with the small-cap-laden Russell 2000 leading the way with a 1.7% gain. In my Feb. 24 Market Outlook, I pointed out that three major U.S. indices — the Dow industrials, Dow transports and Russell 2000 — had yet to set new 2014 highs.#-ad_banner-# As of Friday, only one index is left without a new year-to-date high, the Dow industrials. Overall, this is positive for the broad market as the various U.S. indices are now for the most part confirming each other’s recent strength. However, the deeper that… Read More

All major U.S. stock indices closed higher for the week of March 7, with the small-cap-laden Russell 2000 leading the way with a 1.7% gain. In my Feb. 24 Market Outlook, I pointed out that three major U.S. indices — the Dow industrials, Dow transports and Russell 2000 — had yet to set new 2014 highs.#-ad_banner-# As of Friday, only one index is left without a new year-to-date high, the Dow industrials. Overall, this is positive for the broad market as the various U.S. indices are now for the most part confirming each other’s recent strength. However, the deeper that we go into 2014 without a confirming new high in the Dow, the more problematic it can eventually become from a Dow Theory standpoint. The Dow finished last week at 16,453, just 0.7% off its Dec. 31 all-time high. Market Momentum Still Bullish, but Becoming a Bit Frothy In my Feb. 18 report, I said that the bellwether S&P 500 was at a near-term inflection point according to market momentum, from which its larger 2013 advance should resume if still valid. The index set a near-term low at 1,825 two days later, on Feb. 20, and has since risen… Read More

For investors who focus their investment strategies with regard to the broader economic backdrop, the next few weeks are likely to get a lot of attention. A slew of key data points may help investors better assess whether recent signs of slowdown are just a passing phase, or a harbinger of a deepening trough for the world’s largest economy. Approaching Stall Speed Each week, economists at Morgan Stanley (NYSE: MS) incorporate fresh data points to update their models for GDP growth. At the end of January, these economists predicted the U.S. economy would grow around 2.3% in the first… Read More

For investors who focus their investment strategies with regard to the broader economic backdrop, the next few weeks are likely to get a lot of attention. A slew of key data points may help investors better assess whether recent signs of slowdown are just a passing phase, or a harbinger of a deepening trough for the world’s largest economy. Approaching Stall Speed Each week, economists at Morgan Stanley (NYSE: MS) incorporate fresh data points to update their models for GDP growth. At the end of January, these economists predicted the U.S. economy would grow around 2.3% in the first quarter. That figure is roughly in-line with the fourth quarter of 2013’s GDP growth rate (which was recently revised down from 3.2%).#-ad_banner-# But over the past month, Morgan Stanley’s forecasts have been steadily trimmed. Thanks to weak construction spending, slow retail sales and a low level of housing starts, they now think the economy is on track to grow just 0.7% in the first quarter. To put that in context, the U.S. economy has grown less than 1% (on an annualized pace) only once in the past 11 quarters. In the third quarter of 2011, the economy almost slid back… Read More

The bellwether S&P 500 traded completely inside of last Monday’s trading range from Tuesday through Thursday of last week, indicating near-term investor indecision, before staging a tentative move to new all-time highs on Friday. Friday’s move to new highs, despite a sharp downward revision in Q4 2014 GDP and amid worries about Russian intervention in Ukraine, was an impressive show of bullish investor conviction and is characteristic of a market that wants to go higher. #-ad_banner-#Last week’s new 2014 high in the small-cap Russell 2000 index, matching those in the S&P 500 and in the tech-laden Nasdaq indexes, was another… Read More

The bellwether S&P 500 traded completely inside of last Monday’s trading range from Tuesday through Thursday of last week, indicating near-term investor indecision, before staging a tentative move to new all-time highs on Friday. Friday’s move to new highs, despite a sharp downward revision in Q4 2014 GDP and amid worries about Russian intervention in Ukraine, was an impressive show of bullish investor conviction and is characteristic of a market that wants to go higher. #-ad_banner-#Last week’s new 2014 high in the small-cap Russell 2000 index, matching those in the S&P 500 and in the tech-laden Nasdaq indexes, was another positive sign. However, as discussed here last week, both the Dow Jones Industrial Average and Transportation Index continue to lag and must also establish new 2014 highs to confirm and corroborate the recent strength seen in the rest of the market. Improving Market Breadth = More Horsepower for the Trend Despite the lagging Dow Jones indexes, there are also a lot of good things happening under the hood of this market — particularly on a near term basis. One of these is the positive shift in market momentum as indicated by the rising Moving Average… Read More

The financial sector was by far the biggest beneficiary of the trillion dollars injected into the economic system by the Federal Reserve. The traditional drivers of the sector, such as interest rates, took a back burner to the surge of capital. Acting like a shot of adrenalin, the money sent the sector’s biggest players soaring higher in 2013. One of the primary exchange-traded funds (ETFs) tracking the sector, iShares Dow Jones US Financial (NYSE: IYF), was up close to 30%, with many of its components posting similar massive increases. But all good things must come to an end. I think… Read More

The financial sector was by far the biggest beneficiary of the trillion dollars injected into the economic system by the Federal Reserve. The traditional drivers of the sector, such as interest rates, took a back burner to the surge of capital. Acting like a shot of adrenalin, the money sent the sector’s biggest players soaring higher in 2013. One of the primary exchange-traded funds (ETFs) tracking the sector, iShares Dow Jones US Financial (NYSE: IYF), was up close to 30%, with many of its components posting similar massive increases. But all good things must come to an end. I think the party is over for this sector — at least for the rest of 2014. The sector sold off hard in January but has staged an impressive bounce back in February. Looking at the iShares financial ETF’s daily chart, you can clearly see the sharp selling in January and the bounce-back near the highs in February.   #-ad_banner-#As you know, I don’t place much credence in traditional technical analysis alone as a predictive tool in most cases. However, this pattern, combined with what is happening fundamentally, paints an ominous picture for the near-term future of the financial sector. … Read More

If you racked up big gains in the stock market last year, you have Ben Bernanke and his cohorts at the Federal Reserve to thank. #-ad_banner-#The S&P 500’s 29.6% gain in 2013 (32.4% when dividends are included), which was the best year since 1997, was largely based on comments made by the Fed in December 2012. Back then, the economy was so weak that the Fed committed to keep the federal funds rate at historic lows in place until at least the middle of 2015, even later than many economists had assumed. Against such a favorable interest rate backdrop, stocks… Read More

If you racked up big gains in the stock market last year, you have Ben Bernanke and his cohorts at the Federal Reserve to thank. #-ad_banner-#The S&P 500’s 29.6% gain in 2013 (32.4% when dividends are included), which was the best year since 1997, was largely based on comments made by the Fed in December 2012. Back then, the economy was so weak that the Fed committed to keep the federal funds rate at historic lows in place until at least the middle of 2015, even later than many economists had assumed. Against such a favorable interest rate backdrop, stocks faced little resistance. Indeed, throughout 2013, the likelihood of an imminent increase in the federal funds rate remained off the table. And three Fed governors even suggested in December that interest rates would remain untouched into 2016. But in the early months of 2014, the Fed playbook is starting to look different. The recently released minutes from the past Fed meeting in late January show that some Fed governors are getting anxious. As The Wall Street Journal noted recently, Fed governors have begun discussing “the possibility of rate hikes in the near future.” An increasing number… Read More