Scott Martindaleby Scott Martindale
President, Sabrient Systems LLC

You might not have realized it given the technical consolidation in March, but Q1 2019 ended up giving the S&P 500 its best Q1 performance of the new millennium, and the best quarterly performance (of any quarter) since Q3 2009. Investors could be forgiven for thinking the powerful rally from Christmas Eve through February was nothing more than a proverbial “dead cat bounce,” given all the negative news about a global economic slowdown, the still-unresolved trade skirmish with China, a worsening Brexit, reductions to US corporate earnings estimates, and the Fed’s sudden about-face on rate hikes. But instead, stocks finished Q1 with a flourish and now appear to be poised to take another run at all-time highs. The S&P 500, for example, entered Q2 less than 4% below its all-time high.

Overall, we still enjoy low unemployment, rising wages, and strong consumer sentiment, as well as a supportive Fed (“Don’t fight the Fed!”) keeping rates “lower for longer” (and by extension, debt servicing expenses and discount rates for equity valuation) and maintaining $1.5 trillion in excess reserves in the financial system. Likewise, the ECB extended its pledge to keep rates at record lows, and China has returned to fiscal and monetary stimulus to revive its flagging growth stemming from the trade war. Meanwhile, Corporate America has been quietly posting record levels of dividends and share buybacks, as well as boosting its capital expenditures – which is likely to accelerate once a trade deal with China is signed (which just became more likely with the apparently-benign findings of the Mueller investigation). In addition, the bellwether semiconductor industry is presenting a more upbeat tone and an upturn from a cyclical bottom (due to temporary oversupply), while crude oil has broken out above overhead resistance at $60.

On the other hand, there is some understandable concern that US corporate earnings forecasts have been revised downward to flat or negative for the first couple of quarters of 2019. Of course, it would be preferable to see a continuation of the solid earnings growth and profitability of last year, but the good news is that revenue growth is projected to remain solid (at least 4.5% for all quarters), and then earnings is expected to return to a growth track in 2H2019. Moreover, the concurrent reduction in the discount rate (due to lower interest rates) is an offsetting factor for stock valuations.

All of this leads me to believe that economic conditions remain generally favorable for stocks. In addition, I think we may see upside surprises in Q1 and Q2 earnings announcements, especially given the low bar that has been reset. But it also may mean that investors will become more selective, with some stocks doing quite well even if the broad market indexes show only modest growth this year.

In this periodic update, I provide a market commentary, offer my technical analysis of the S&P 500, review Sabrient’s latest fundamentals-based SectorCast rankings of the ten US business sectors, and serve up some actionable ETF trading ideas. In summary, our sector rankings remain bullish and the technical picture suggests an imminent upside breakout, while the sector rotation model maintains its a bullish posture. Read on…

Scott MartindaleStocks continue to hold up like troopers even though bulls have lost some traction, perhaps due to a combination of the summer doldrums and overbought technical conditions that have them biding time until the next setup for a run at new highs. To be sure, bears are AWOL and missing their opportunity to create some fear and ignite a correction.

smartindale / Tag: SPY, VIX, IYF, iyw, IYJ, IYZ, IYC, IYK, IYH, IDU, IYM, IYE, FTEC, FIDU, FNCL, FUTY, FENY, FHLC, XSD, FXR, KIE, SWKS, NXPI, RTN, ALK, FITB, ETF, iShares, sectors, SectorCast / 0 Comments

Education is the ability to listen to almost anything without losing your temper or your self confidence.” -- Robert Frost

Right now, it looks like it would take a major downside event to prevent the major indices from having a swimmingly good year.

daniel / Tag: SPX, DJIA, NASDAQ, COMP, VIX, VXX, KIE, FXO, XLF, IYF, VFH, volatility, CBOE, Fear Index / 0 Comments

An idea is a point of departure and no more. As soon as you elaborate, it becomes transformed by thought.” — Pablo Picasso

Last week saw investors exposed to a broad swath of noise from a number of diverse sources, and the bottom line was that Wall Street pretty much ended the week close to where it had begun.

daniel / Tag: SPX, DJIA, NASDAQ, COMP, KIE, FXO, IYF, XLF, VFH, FXI, China / 0 Comments

It was another week of wild mood-swings on Wall Street, as Ben Bernanke seemed to be intent on roiling the markets. Deliberate or not, the effect was the same, as investors seemed hesitant to jump in on the dips with the same enthusiasm that they have for the majority of the year so far. The question is, will the volatility express continue to barrel through the summer vacation months?

daniel / Tag: DJIA, COMP, SPX, VIX, VXX, KIE, FXO, IYF, XLF, VFH, volatility, FED, BERNANKE, fear gauge, Chicago Board Options Exchange / 0 Comments

The last couple of weeks has seen Wall Street moving in something of a sideways trend, though that hardly indicates the increased level of intraday volatility that the equity market has been experiencing since the last week of May. Will it be more of the same for the coming week? Bet on it . . .

daniel / Tag: DJIA, COMP, SPX, VIX, KIE, FXO, IYF, XLF, VFH, volatility, FED, Federal Reserve Bank, BERNANKE / 0 Comments

The VIX is looking a little bit jumpy as of late, perhaps reflecting something of a rising wariness among investors in terms of risk.

Can the Bulls be standing on something of a slippery slope, about to slide towards a trend reversal? Or is it just a seasonal thing, with investors tightening up their portfolios prior to summer?

 

daniel / Tag: DJIA, COMP, SPX, VIX, KIE, FXO, IYF, XLF, VFH, PSP, WMT Volatility, FED, Federal Reserve Bank, BERNANKE / 0 Comments

"If you simply try to tell the truth you will, nine times out of ten, be original without ever having noticed it." -- C.S. Lewis

Another week, another victory lap for the Bulls.

Anyone notice a pattern here? Technically speaking, at least, that pattern is a solid uptrend, with nary an imminent level of resistance close to the horizon.

daniel / Tag: DJIA, COMP, SPX, KIE, FXO, IYF, XLF, VFH, PSP, M, WMT, financial sector, consumer sentiment, Retail Sector, Eurozone, China, Syria / 0 Comments

“All generalizations are false, including this one.” -- Mark Twain

For those investors who may have been feeling a tad complacent due to the recent record highs of several of the major indices, last week probably served as a reminder that high volatility is always just a shout away from knocking the market down a notch or three.

daniel / Tag: KIE, FXO, IYF, PSP, VFH, DJIA, COMP, SPX, VIX, AAPL, financial sector, Eurozone, CBOE, SP 500 Index, China / 0 Comments

david trainerThe financial sector is one of four sectors to earn our “dangerous” rating and is the worst-ranked sector in the our 3Q11 Sector Roadmap report according to my methodology at New Constructs.

dtrainer / Tag: AFL, C, FAS, FXO, IAK, IAT, IYF, IYG, KBE, KBWP, KCE, KIE, KRE, KRU, MS, PFI, PIC, PJB, RWW, RYF, TRV, UYG, VFH, XLF / 0 Comments

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