Market view is the general sentiment of investors towards the market. This is the combined view of all investors at any one time. Since this is not static, but rather always changing, market sentiment is usually seen in three general categories: extremely optimistic (bullish); extremely pessimistic (bearish); and neutral or equal in number of optimists and pessimists. The view of market participants can be based on either fundamental or technical reasons. The market view is seen as moving the main indices, which will push individual stocks in its wake.

Spain technically blundered into its second recession since 2009 in the first quarter and the country appears to be ravaged by heavy debt and muted growth. The Spanish government is trying to cut the budget deficit, but, with the country’s jobless rate at near 25%, it will not be easy based on my market view. The country’s gross domestic product (GDP) is predicted to contract 1.7% this year and expand an anemic 0.2% in 2013, with the unemployment rate stuck at around 24%.

And like Greece and Italy (some of the other PIIGS), my market view is that Spain will need aggressive austerity measures to put the country back on track. It will not be easy and the concern is that, with Spain being the ninth largest economy in the world, fallout here will be devastating to Spain and the rest of the world, according to my market view. Monitor the Spanish Bond Auction that showed the 10-year yield at 5.80%. A move to above six percent would be a red flag and, if yields rise to seven percent, my market view says watch out.

In all, my market view is that the world economies have changed dramatically since September as a result of the sharp slowdown in Europe’s growth along with the unrest and political turmoil in the Middle East and North African region. The economic prospects are gradually strengthening, according to my market view, as a result of the better policy steps in the eurozone and improved activity in the U.S. where the growth is rising and unemployment is falling, but there is still real risk to deal with. Don’t tell the roughly 13 million unemployed Americans that things are better, as I discussed in The Good Times Are Here? Tell That to the Unemployed.

In this election year, President Obama still needs to deal with economic risk, the massive national debt, and struggling deficit levels in some states.

My market view is that the outlook for emerging Asia remains strong due to improving domestic consumption, along with lower inflation and external current account surplus.

In Asia, the decision by the Bank of China to increase the trading band for the renminbi, allowing market forces to play a greater role in determining the level of the exchange rate, looks to be a big step in the right direction, according to my market view. The real effective exchange rate in China has appreciated by around seven percent in the last 12 months, signaling a shift from investment-led to consumption-led growth in the world’s fastest growing economy.

India also surprised the market participants when the Reserve Bank of India cut interest rates by 50 basis points instead of the widely expected 25 basis points at its recent monetary policy meeting.

These events have provided some relief to the financial markets along with reducing the threat of sharp global slowdown, yet the downside risks remain elevated due to high liquidity needs to strengthen the capital cushions and rollover requirements of the European banks.

According to the Global Financial Stability Report, large European Union based banks could shrink their combined balance sheet to $2.6 trillion by end of 2013, resulting in reduction in lending and sale of non-core assets.

Then we have the Middle East. Saddam Hussein and Obama bin Laden may be gone, but my market view is that the risk from this area is prevalent. The unrest in the Middle East is being closely monitored by the market participants. The situation in Syria continues to remain frightening, as the unrest persists. As per the latest media releases, Russia has halted deliveries of light arms to Syria to avoid conflicts between the government forces and the opposition groups. Moreover, Syria is willing to allow UN observers to use its helicopters when necessary to evacuate wounded people.

My market view is that, before you stash your capital in stocks, just be aware that the global risk remains.

The first quarter was great for stocks. April on the other hand has not been kind to stocks so far, but it’s early. The question is: are stocks pausing and then moving higher or lower?

Is this a sucker’s rally?

The bull market is into its fourth year and my market view is that the near-term technical picture shows tough chart resistance.

The S&P 500 and Dow Jones Industrials have declined in four straight sessions, and they are searching for buying support, according to my market view.

The Russell 2000 is down 3.25% in April. The Dow is down 2.14%. More importantly, the Dow and Russell 2000 have breached below their respective 50-day moving average (MA).

Despite the near-term weakness in small-cap stocks, in my market view, I continue to feel that the smaller growth stocks, especially in technology, have the biggest upside. I discussed this in Where to Look for the Biggest Potential.

Chart courtesy of www.StockCharts.com

A market view of the S&P 500 shows a 14-week upward move. My market view is that there’s some near-term topping action and a downside break. The S&P 500 is within 11 points of its 50-day MA as of the close of Monday. My market view is that a break below could trigger additional weakness down to as low as the 100-day MA at 1.312 and 1,300, a possible correction as much as 9.4%.

My market view is not that this will happen, but that there is some technical evidence a market adjustment may be coming, especially if traders cannot find any fresh reasons to buy.

The next several days and weeks could prove critical, as stocks look for support in spite of the weak relative strength on the charts. My market view is that you should watch for some potential oversold buying support.

At this juncture, stocks need a fresh catalyst to move higher. Failing this, we could see tight trading surface as we move into the slower and historically weaker summer months.

And don’t forget there’s a historical market view that suggests traders should rotate away from stocks in May and come back in the fall for the best results. The Stock Trader’s Almanac points to the May to October six-month period as generally the weakest for stocks.

I’m optimistic towards the domestic economic renewal, but the fragility of the jobs market and U.S. housing market remain a difficult hurdle to overcome. For instance, a mere 120,000 jobs were generated in March, well below the consensus 200,000 estimate and the upwardly revised 240,000 in February. It was the first decline below 200,000 after three months. A plus is that the jobless rate fell to 8.2%. The result is not positive for a desperate jobs market that needs to generate jobs. And don’t forget the unemployed who have left the workforce unable to find work and those who are underemployed.

The focus over the next few weeks will be on the first-quarter company earnings beginning with Alcoa, Inc. (NYSE/AA) on Tuesday, followed by Google Inc. (NASDAQ/GOOG) on Thursday, along with JPMorgan Chase & Co. (NYSE/JPM) and Wells Fargo & Company (NYSE/WFC) on Friday. Earnings could dictate the direction of stocks for the majority of the summer.

The reality is that the market is jittery and, should the Q1 earnings be as bad as some expect, we could see additional downside or sideways moves.

The bulls have been in full control for the past three years, but with the key stock indices at multi-year highs, it’s time to pause and take a look at where we are with my market view.

On Wednesday, stocks plummeted after several days of hesitation on the charts. My market view is that traders appear to be looking more for reasons to sell than to buy.

With the S&P 500 at its highest level since 2008, I expect to see some hesitancy. My market view is that stocks have had an amazing run so far this year and could pause.

Triggering the selling on Wednesday was the non-response by the Federal Reserve on additional stimulus (aka QE3). The Fed appears to be content with what it has done so far, but at the same time warned that the jobs growth may stall should the economic renewal pause.

The private ADP jobs report was softer than expected, which in my market view may signal a soft non-farm payrolls on Friday with jobs growth estimated at 200,000 jobs, down from 227,000 in February. For a healthy jobs market, you want to see job creation at around 500,000 monthly. I still have concerns towards the jobs market, which I discussed in Don’t Tell the Unemployed the Good Times are here. (PC031212)

The risk in the eurozone is also prevalent, with speculation of another recession looming. Spain received a poor response to its bond auction. With a high unemployment rate and muted growth in Spain, things will not be easy in my market view.

The Chicago Board Options Exchange Market Volatility Index (VIX)—a measure of option volatility for the S&P 500 often known as the “fear gauge”—remains low at around 16. This is the lowest level since May 2011, when the S&P 500 was trading around the 1,350 level. A low VIX reading may indicate that traders are too lax and represent a contrarian signal of pending weakness.

Note the inverse relationship of the VIX and S&P 500 since October 2011. Should the VIX rise, we could see a corresponding decline in the S&P 500.

Chart courtesy of www.StockCharts.com

The current valuation is reasonable in my market view, but the degree of the buying is overdone.

All eyes will be focused on the first-quarter earnings season, which will begin with Alcoa, Inc. (NYSE/AA) reporting on Tuesday.

The news doesn’t look promising for earnings at this juncture. Based on the current estimates, earnings growth is estimated to be 3.2% for the first quarter, following 9.2% growth in the Q4, according to Thomson Reuters. The Q1 reading tends to be low, but should move higher as earnings are reported. Earnings growth in the Q2 is estimated at 9.2%.

The two top-performing earnings expected for the Q1 are Industrial’s  (+10.3%) and Financials (+8.3%). Technology (+16.8%) was the second top gainer in the Q4. The two weakest areas of earnings growth in the Q1 are expected to be the same as the Q4: Telecom (-14.1%); and Materials (-15.6%).

It’s going to be an interesting few weeks ahead of us. If earnings don’t deliver, my market view is that stocks may be stuck on the charts.

And don’t forget there’s a historical pattern that suggests traders move away from stocks in May and come back in the fall for the best results.

My suggestion is to use put option as hedge protection and write short-term covered call options to generate some premium income should markets stall.

Happy New Year!

In 2011, small-cap stocks lagged blue-chips and large-cap stocks following a strong 2010. In my market view, the big difference in 2011 was the uneasiness of the economic renewal in the U.S. and global economies. And, despite a positive January 2011, stocks largely fell last year.

The general market view is that what happens in January is an important indicator for the year as far as performance goes. Historical records indicate that stocks have increased an average of 1.6% in January since 1969, according to Stock Trader’s Almanac.

I was off last year as far as my forecast and market view, as I underestimated the weakness of the eurozone debt and the inability of domestic jobs and housing market to turn around.

For 2012, my market view is cautious to start the year based on the high global risk.

The fact that the economy is expanding in spite of a lack of strong jobs growth is encouraging. We are seeing what economists call a “jobless recovery.” And my market view is that this will likely continue in 2012, as the unemployment rate is expected to remain high at over eight percent, despite the extended tax cuts to drive consumer spending and economic renewal.

This is also an election year, so there will be haggling as far as policies go, as both parties are aiming to set themselves up for the election. As such, many pundits are expecting to see political gridlock to start the year and this will likely impact President Obama.

My market view is that we need to see leadership from such areas as the banks and technology. However, there was recent evidence of slowing from large-cap technology companies.

It definitely will be a tricky year, albeit Wall Street is again estimating that stocks will advance over 10% in 2012. I’m not sure, but if the situation in Europe improves and China does not have a hard landing, then achieving a gain of 10% is reasonable…and the gain would actually likely be higher.

Again as I said at the start of 2011, if all goes well, my market view is that the S&P 500 could test 1,400 this year. How much the index rises will be dependent on the global and U.S. economies. My top areas for aggressive growth continue to be technology and small-cap stocks. Areas in technology that look promising include Internet and wireless.

I also like the big banks as the balance sheets strengthen and loans increase.

Gold and silver look good, especially the junior gold miners.

Outside the U.S., I continue to favor Chinese stocks.

While my market view is concerned with is the debt and growth situation in Europe, don’t forget the $15.0 trillion in U.S. debt and mounting U.S. deficit scenario domestically.

And then there are the high unemployment rate and declining wealth from falling home prices driven by home foreclosures and short sales. These factors need to improve to give us any hope for a better 2012; otherwise, things could play out similarly to how they did last year.

Read my view on the dire situation in Europe that needs to be remedied in European Union: Resolution Up in the Air Means Continued Risk.

Oil prices continue to be largely dictated by the folks in the Middle East. And, unless we see a massive flow of new oil from the controversial tar sands in Alberta, Canada, and a move back to offshore drilling in the post-BP era, oil prices will continue to be dictated by OPEC. I think it’s wrong to be held hostage by a group of oil-rich countries.

On Wednesday, oil cartel OPEC and its 11 member countries raised the production ceiling for its group to 30 million barrels a day in an effort to adjust for the increased output from post-Gaddafi Libya. The increase was in line with the 30.37 million barrels a day produced in November. The group decided that oil prices of $100.00 a barrel was reasonable and $80.00 was viewed as the low point that was acceptable for oil prices. This might be fine with OPEC, as it adds to their coffers; but with the average price of gasoline at $3.28 a barrel, consumers aren’t happy with these oil prices.

The government must continue to look at ways to reduce the country’s insatiable appetite for oil and reduce the impact of high oil prices on the economy.

Oil magnate T. Boone Pickens has long pushed his view to cut the country’s reliance on foreign oil. He is investing heavily in alternative energies such as natural gas and wind-powered energy generation.

President Obama knows this and has increased government spending to foster less dependence on fossil fuels and to cut oil prices. The government has spent about $2.7 billion in stimulus to try to get the electric vehicle (EV) market going. And, with the high price of gasoline, I expect the demand for pure electric or hybrid vehicles to continue to grow.

There are estimated to have been 30.6 million EVs sold in 2011 worldwide and this is expected to rise to 51.3 million EVs by 2021, according to IDTechEx.In the U.S., the Obama administration has set a goal of one million EVs on the road by 2015. This is a nice start, but the focus must continue, especially if the election in 2012 results in a new president and party.

A play on the rising demand for EVs and other electric-dependent applications is AeroVironment, Inc. (NASDAQ/AVAV), based in Monrovia, CA. Founded in 1971, AeroVironment operates in two key segments: Efficient Energy Systems (EES); and electric-powered Unmanned Aircraft Systems (UAS).

The real intriguing thing about AeroVironment is its EES segment, which includes the EV charging solutions area. This is comprised of home charging, public charging, fast charging, data collection, grid-integrated communications, training, and support services. Clients include consumers, automakers, utilities, government agencies, and businesses. The charging systems are currently used in 25 states.

An important milestone for the EV unit was the company being selected by Washington State to develop and install a network of nine fast-charging stations for advanced EVs known along parts of the I-5 between Canada and Everett, WA, which are known as Washington’s electric highways. I feel this could expand to other states. The end result would be clean energy and reduced impact from high oil prices.
Clearly, there is plenty of long-term potential here and it appears that AeroVironment at on the forefront of this development.

At the top of my list for technology stocks continues to be Apple (NASDAQ/AAPL), as the company gets ready for a big holiday shopping season that promises to have “iPads” and “iPhones” on many shopping lists. You can see what makes me excited with regard to Apple in Apple Is Shining Bright…RIM, Not So Much.