Posts Tagged ‘NASDAQ’
According to the Investment Company Institute, investors have been taking money out of U.S. equity funds since April of this year.
Between April and July of 2014, investors pulled $32.0 billion from long-term stock market mutual funds that invest in U.S. stocks. While August’s monthly figures are not available, looking at weekly data, it appears investors ran away from the stock market in August as well. (Source: Investment Company Institute web site, last accessed September 16, 2014.)
How does a stock market rise when investors are selling? Well, there is a bigger anomaly in the stock market you need to be aware of.
Another indicator is suggesting investors are scared about the stock market. The yields on long-term U.S. bonds have been declining since March despite the Federal Reserve’s prediction that interest rates are to rise sharply next year and in 2016.
Chart courtesy of www.StockCharts.com
As the chart above shows, yields on long-term U.S. bonds continue to go lower. Again, this is on the backdrop of the Fed getting out of the money printing business (and warning investors that interest rates are going to rise).
U.S. bonds have historically gone down when the Fed has told us interest rates are going to rise. But the fear of higher rates (and lower bond prices) is overwhelmed by the strong demand for U.S. bonds, as scared stock market investors jump into U.S. bonds—where they believe their money will be safe.
There are definite cracks starting to show in the stock market. While we hear and read about the main indices moving higher, there are fewer and fewer companies reaching new price … Read More
There’s good resilience to this market. On most days, the NASDAQ Composite is still beating both the S&P 500 and Dow Jones Industrial Average comparatively, which is bullish. Lots of stocks are pushing new highs and many seem to be breaking out of their previous near-term trends.
NIKE, Inc. (NKE) is a large-cap, dividend-paying company that I view as attractive for long-term investors.
The stock has been in consolidation, trading range-bound since the beginning of the year but is finally breaking out and pushing through the $80.00-per-share level.
This position went up tremendously last year and has been due for a break. The company has experienced solid revenue and earnings growth over the last several quarters.
The stock’s reacceleration looks meaningful, and I suspect the position is in for a new uptrend.
The other company that I feel is a good example of the kind of stock that could make for a great holding in any long-term equity market portfolio is The Walt Disney Company (DIS). (See “Why This Is Still My Favorite Entertainment Stock.”)
I’m not surprised this position is still ticking higher. But it has been moving up very consistently since October of 2011.
The stock just broke the $90.00-per-share level. This time two years ago, the company was trading for $30.00 a share, which is incredible capital appreciation for such a mature large-cap enterprise.
Institutional investors are still buying earnings reliability, and I think this trend will hold right through 2015.
Both NIKE and Disney offer earnings reliability and the fact of the matter is that it’s difficult for any company to generate double-digit growth…. Read More
The stock market has an underlying strength to it, seemingly only to be undone by geopolitical events. Fed action always has the potential to shock the system. Negative economic news isn’t fazing this market.
On the back of a pretty decent second quarter, many corporate outlooks predict another year of decent growth, particularly with earnings.
While the stock market retrenched recently, positive days are still led by the Dow Jones Transportation Average, the Russell 2000 Index, and the NASDAQ components, which are traditionally positive for broader sentiment.
Some speculative fervor has come back to two stock market sectors that are traditionally volatile—biotechnology stocks and restaurant stocks.
But there really isn’t an underlying trend to latch onto. Jumping on the bandwagon of risky stocks seems unwise considering the stock market is at an all-time record-high.
This is a market where equity investors have to be highly selective and wait for the right opportunities to present themselves, if you’re considering new positions at all.
This can be in the form of a specific sector theme (like oil and gas, for example) or looking for good companies that have retrenched for their own specific reasons.
In any case, with the stock market at a record high, it’s difficult to find value, and new positions become entirely reliant on market momentum, not necessarily individual corporate achievement.
There are very few companies that I would consider now, but within the context of a long-term stock market portfolio, investors want their money to be put to work.
In equities, I still think that portfolio safety is the name of the game. This is a market that … Read More
Biotechnology stocks and the Russell 2000 began rolling over at the beginning of July, followed by transportation stocks at the end of the month.
It’s definitely a signal that the stock market is tired, but after such a strong breakout performance in 2013, the market still hasn’t experienced a material price correction in quite some time.
Second-quarter earnings came in mostly as expected and many blue-chip stocks sold off on good results, while companies backed existing full-year guidance. This happens often, as management teams try to make it easier for the company to “outperform” Street consensus. In a lot of cases, the only reason earnings per share advanced comparatively was increased share repurchases.
But it was mostly a decent earnings season and corporate balance sheets remain strong.
There’s not a lot of action to take in this market. Stocks have gone up tremendously and earnings are playing catch-up with valuations.
A little extra cash isn’t a bad thing with equities at their highs; however, finding good value with the prospect of growth in this market is becoming difficult.
I still think the domestic energy sector has a lot to offer investors, particularly those who are looking for income. Pipelines are a good business to be in as they throw off lots of cash and in many cases, revenues are not tied to the spot price of the underlying commodity.
With speculative fervor now reduced as evidenced by the trading action in biotechnology stocks, initial public offerings (IPOs), and select technology companies, it’s reasonable to expect the next couple of months to be pretty lackluster in terms of trading action. (September … Read More
Yesterday, the Dow Jones Industrial Average fell 317 points, while the NASDAQ Composite Index fell 93 points—respective losses of about two percent per index. This morning, stock market futures are down again.
As a reader of Profit Confidential, this “rout” we are now in should come as no surprise. I have been writing for months how overpriced the stock market has become, how the stock market has become one big bubble thanks to the easy money policies of the Federal Reserve, and how the bubble would burst.
Yesterday, those who have been riding the stock market’s coattails higher and higher got the first taste of what is being called a “correction” by the mainstream media. But like I just said, to me, this is a stock market bubble that is bursting—very different than a correction. For months, historically proven stock market indicators (many of which I have written about in these pages) have been flashing red…but very few investors paid any attention to them.
The Dow Jones is now down for 2014. Yes, seven months into the year and big-cap stocks have gone nowhere. So far in 2014, investors would have done better owning gold and silver or U.S. Treasuries.
I have been predicting this will be a down year for the stock market and I’m keeping with that forecast. After five consecutive positive years for the stock market, the bounce from the 2008 market low of 6,440 on the Dow Jones could finally be over.
Dear reader, as elementary as it sounds, interest rates are the catalyst for all this.
After falling for 30 years, a time in … Read More
If you want to see what happens when irrationality over a stock comes to an end, check out this chart of Amazon.com, Inc. (NASDAQ/AMZN).
In 2013, Amazon.com stock went up 63%. So far this year, the stock has collapsed 25% as investors realize converting growing revenues into corporate earnings for Internet-based stocks on key stock indices is not an easy task.
Mind you, Amazon.com isn’t the only tech stock on the key stock indices that is getting hit. Other tech stocks are under pressure, too, as evidenced by the NASDAQ being down for the year.
But despite stocks being overvalued—and some very big-name Internet stocks on the key stock indices coming down in price—investors continue to buy.
In the first three months of this year, the long-term stock mutual funds saw inflows of $54.13 billion. (Source: “Historical Flow Data,” Investment Company Institute web site, last accessed May 12, 2014.) April’s monthly figures aren’t available just yet, but from weekly data, we estimate another $10.0 billion worth of long-term stock mutual funds were bought in April.
And they are buying stocks with borrowed money. As of March, margin debt on the New York Stock Exchange (NYSE) stood at a record $450.2 billion, up 19% from March of 2013. (Source: New York Stock Exchange web site, last accessed May 12, 2014.)
But this is what I find most interesting…
Even though investors have borrowed more money than any other time in history to buy stocks, most key stock indices are flat for the year. Among the key stock indices, the Dow Jones Industrial Average is up marginally, while … Read More
There still is no real trend in the equity market. One day, stocks sell off big-time; the next, the S&P 500 and Dow Jones Industrial Average hit new record-highs.
This is a very tough market to figure; anything can happen when monetary policy is highly accommodative.
A lagging NASDAQ Composite isn’t a worry. Neither is the Russell 2000 index. Stocks won’t come apart so long as so many large-caps are pushing their highs.
And not all technology stocks are retrenching, either. Some of the old technology bellwethers are actually doing quite well these days. Microsoft Corporation (MSFT) is trading right at a multiyear high, with a 2.8% dividend yield and a forward price-to-earnings ratio of approximately 14.
Even Intel Corporation (INTC), which is having a pretty tough time generating much in the way of top-line growth, is recovering on the stock market and is very close to breaking out of a multiyear price consolidation. Intel currently offers a 3.4% dividend yield and is not expensively priced.
One day, stocks are reacting to geopolitical events in Ukraine; the next, it’s Chinese economic data, then it’s mergers and acquisitions…
If anything, the reaction to first-quarter earnings was pretty muted. But even though the beginning of the year started out with considerable downside, stocks recovered strongly after policy reassurance from the Federal Reserve. While the action’s still choppy, underlying investor sentiment is holding up.
This is a market that continues to favor existing winners, but not necessarily at the speculative end. (See “Risk vs. Reward: Is It Time to Cash Out of This Bull Market?”) The reticence that launched blue chip … Read More
A lot of stocks are rolling over, breaking their 50- and 200-day simple moving averages (MAs). This is a tired market that could very well consolidate or correct right into the fourth quarter.
And the economic data has been softer, as well. Throw in geopolitical tensions with Russia and we have the makings of a material price retrenchment.
There’s still resilience, however, in some of the most important stock market indices. Stocks composing the Dow Jones Transportation Average are holding up extremely well, especially compared to the Russell 2000, the NASDAQ Biotechnology index, and the NASDAQ Composite index itself.
While the main market indices are mostly flat on the year, I don’t think investors can expect any capital gains until perhaps the fourth quarter.
From my perspective, relative price strength in the Dow Jones industrials, transportation stocks, and most of the S&P 500 index means that the longer-run uptrend remains intact.
With speculative fervor still coming out of initial public offerings (IPOs) and select biotechnology stocks, this action is an indicator of a tired market that’s long in the tooth, as investors are clearly less willing to speculate on those stocks that don’t offer income or relative safety in their earnings.
Risk aversion won’t kill a secular bull market. But it does mean that risk-capital opportunities are a lot less plentiful. Currently, among speculative stocks, one of the only sectors still experiencing decent price action is oil and gas drilling and exploration.
This is still a market that I think favors existing winners—blue chips, in particular. (See “Top Stocks for the Coming Correction.”)
These are the stocks to … Read More
Did you see this story in the Wall Street Journal last Friday?
“Retirement investors are putting more money into stocks than they have since markets were slammed by the financial crisis six years ago… Stocks accounted for 67% of employees’ new contributions into retirement portfolios in March… That is the highest percentage since March 2008…” (Source: Wall Street Journal, May 2, 2014.)
You read that right. With stocks at a record-high (and valuations stretched), retirees are pouring back into stocks. Are they getting ready to get slaughtered again? I believe so.
If you are a long-term reader of Profit Confidential, you know my take: the “bear” has done a masterful job at convincing investors the economy has recovered and the stock market is a safe place to invest again. Meanwhile, nothing could be further from the truth.
We are living the slowest post-recession recovery on record. And that recovery has been manipulated by the tampering of the Federal Reserve. You see, the Federal Reserve played a key role in driving the key stock indices higher. In 2009, in the midst of a financial crisis, the central bank started printing money and buying bonds. This resulted in lower bond yields. Those who had money in bonds, who had essentially paid nothing, moved into stocks.
And those record-low interest rates enabled companies in the key stock indices to borrow money and issue new equity, using the money to buy their own stock, thus pushing up per-share corporate earnings.
The end result? 2013 was a banner year for stocks on the key stock indices. But as 2014 came around, we began … Read More
Folks, there is a technical breakdown on the charts of the small-cap, growth, and technology groups in the stock market. I can’t say I’m surprised, given the major run-up in 2013 and the lack of any significant stock market correction.
The fact that the majority of the high-momentum technology stocks have corrected more than 20% is a red flag that there could be more breakdowns on the charts. (Read “My Simple, Safe Investment Strategy for Playing Risky Stocks.”)
While I’m not saying that a bear stock market is on the horizon, I do suggest that the stock market risk is above-average at this time, and we could see a bigger correction pending.
On May 6, there was a downside break of the Russell 2000 to below its key 200-day moving average (MA) of around 1,114. This could signal additional downside moves. As of that time, the index was down 4.78% in 2014 and 8.56% from its record high. The previous time the index corrected 10% from its high, it was subsequently met with buying support in the stock market. Note the downward-trending channel on the Russell 2000 chart below.
Chart courtesy of www.StockCharts.com
With the break, you could consider adding the iShares Russell 2000 (NYSEArca/IWM) exchange-traded fund (ETF) as a play on a possible bounce in small-cap stocks, especially if the index corrects more than 10%.
Technology also continues to be fragile, with the NASDAQ south of its 50-day MA. Watch for a possible move and testing of the 200-day MA at 3,982. This index has corrected 6.67% from its recent high and looks to be setting … Read More
With the stock market at its high, it’s more difficult to be a buyer. But when certain stocks break down because they got ahead of themselves, they can be worth a second look if the underlying businesses are still growing.
FARO Technologies, Inc. (FARO) out of Lake Mary, Florida is an interesting technology company that manufactures three-dimensional (3D) measurement and imaging systems used in manufacturing and industrial applications.
The company’s sophisticated products are used for the inspection of components, assemblies, and structures in 3D. With more than 30,000 systems installed all over the world, FARO’s products and software are also used in the reconstruction of accidents and crime scenes.
The stock was on a tear last fall but broke down with the broader market in January. The company then missed consensus revenue expectations, and the position tumbled. This doesn’t mean FARO is no longer a good business, though.
The company’s one-year stock chart is featured below:
First-quarter sales for 2014 grew 12% to $73.4 million. Earnings grew more modestly, coming in at $5.0 million, or $0.29 per share, up from $4.6 million, or $0.27 per share, in the first quarter of 2013.
Management cited double-digit sales growth in the Americas and Asia, and mentioned that the company’s European markets are improving. FARO plans to increase its spending on new research and development this year and hopes to create new products for use in architecture, engineering, construction, and forensics.
FARO has lots of cash in the bank and practically no debt. Yet for the stock market, the first quarter wasn’t quite good enough.
The stock was at … Read More
A good amount of speculative fervor has come out of this market so far this year, but there’s still quite a bit of valuation froth around.
Across the board, 3D-printer stocks have come back. 3D Systems Corporation (DDD) still boasts a trailing price-to-earnings (P/E) ratio of around 150.
Tesla Motors, Inc. (TSLA) is still going strong. It’s one of few super-hyped stocks that made a strong recovery in January after a material sell-off months before. (See “Buy High, Sell Higher: Top Investment Strategy for Buoyant Markets?”) The position just bounced off $265.00 per share. Next year, Wall Street estimates the company will do more than $5.0 billion in sales.
Looking at the stock market currently, there’s a lot of indecisiveness and geopolitical events are overshadowing the action.
Watch large-cap biotechnology stocks (or the NASDAQ Biotechnology Index) for their trading action specifically. This group of stocks reaccelerated strongly in February and is very much overdue for a material correction.
I’ve noticed several key momentum stocks within the group have started rolling over. This should be a strong contributing indicator to the short-term action unrelated to specific events happening in Ukraine.
Gold is holding up well with the geopolitical tensions, and oil prices are too, but to a lesser degree.
Stocks are due for a break. What looked like the makings of a material correction in January, equities reversed direction after the Federal Reserve, once again, reiterated its willingness to be highly accommodative to capital markets.
This kind of market (after such a strong 2013 for stocks) warrants a significant degree of caution. I wouldn’t be jumping onto any bandwagons. … Read More
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