BY Scott Martindale,
Despite low trading volume, a strong dollar, mixed economic and earnings reports, paralyzing weather conditions throughout much of the U.S., and ominous global news events, stocks continue to march ever higher. Happy days are here again, or so the U.S. stock market would have us believe as all major indices are hitting or challenging new highs. But the world remains on edge about potential Black Swan events from the likes of Russia, Greece, or ISIS (or lone wolf extremists). Moreover, the economic recovery of the U.S. may be feeling the pull of the proverbial ball-and-chain from the rest of the world's economies. Nevertheless, awash in investable cash, global investors see few choices better than U.S. equities. Economic growth continues to slog ahead, and the Fed is expected to continue on its path toward normalizing monetary policy. As a reminder, next Monday the bull market will reach its 6-year anniversary. The SPY chart looks somewhat overbought and overdue for a more significant pullback -- which would be healthy by testing support levels and recharging bullish conviction. Overall, this week's fundamentals-based Outlook rankings look a lot more bullish to me, with economically-sensitive sectors Tech, Financial, Industrial, and all-weather Healthcare in the top five and the emergence of Basic Materials. Our trend-following sector rotation model retains a bullish bias and suggests holding Technology, Financial, and Industrial sectors. Also discussed are some alternative highly-ranked ETFs and individual stock ideas from within the top-ranked sectors, and what the model suggests if you prefer a neutral or defensive outlook.
BY Scott Martindale,
Stocks are hitting new highs across the board, even though earnings reports have been somewhat disappointing. Actually, to be more precise, Q4 results have been pretty good, but it is forward guidance that has been cautious and/or cloudy as sales into overseas markets are expected to suffer due to strength in the US dollar. Evidently, U.S. equities remain a relative safe haven for cautious but hungry global investors who have cheap money in their clutches, thanks to global liquidity and currency wars that allow them to benefit on the exchange with a strengthening dollar. Although the SPY chart certainly looks bullish, I still think it is likely that we will get a longer period of consolidation, and perhaps some retesting of support levels, before there is enough conviction to go much higher. Overall, this week's fundamentals-based Outlook rankings look even more neutral in my view -- and perhaps even a bit defensive -- as market sentiment continues to grow more cautionary. Nevertheless, our trend-following sector rotation model retains a bullish bias and suggests holding Technology, Financial, and Healthcare sectors. Also discussed are some alternative highly-ranked ETFs and individual stock ideas from within the top-ranked sectors, and what the model suggests if you prefer a neutral or defensive outlook.
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