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Dr. Kris
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Dr. Kris has two degrees from MIT because one just wasn't enough. Her life goal was to figure out the universe and having done that (at least to her satisfaction), she decided to tackle something even more difficult—the stock market. Applying the scientific method along with an insatiably... More
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  • Market Notes: Take Advantage Of Low Volatility In A Frothy Market -- June19

    Today the volatility index (VIX) hit a seven year, pre-recession low. A very low VIX is a contrarian indicator, but that doesn't necessarily mean that the market is going to reverse tomorrow. Historically, the VIX can stay low for weeks to months but at some point, it will reverse and when that happens, the market will begin moving to the downside. The biggest problem with the markets is always one of timing, and the more indications we get showing that the market is nearing a top, the better.

    One indication that the market may be getting toppy is to take a look at the stocks populating the New Highs list: consumer staples (tobacco, household products, beverage makers), utilities, and commodities (look at today's jump in gold and silver). This rotation into the more defensive sectors is a sign that investors think a top is near and are repositioning their portfolios into the safer areas.

    Another indication is to consider market valuations. The price/earning ratio (P/E) of the S&P 500 currently stands at 19.56. That's roughly 25% above its historical average. Now, markets can stay over-valued for a while but eventually the pendulum will swing back in the other direction. I look at hundreds of stocks a day and I'm telling you, that there are very few bargains left out there (other than highly speculative stocks such as biotechs). Nobody likes to pay more than the retail price of something, and this holds true for investors, too. When there are no more bargains to be had is when the buying pressure will dry up--and that will be the day the market begins to roll over.

    The list of reasons why the market may be nearing a top is growing, and it would be wise for long-term investors to consider buying long-term put protection for their portfolios such as LEAP puts on index tracking stocks (DIA, SPY, QQQ). This low volatility environment means that options are cheap--like buying insurance at a discount. If you're looking for the real bargain in today's market, long-term put options are it.

    Jun 19 4:49 PM | Link | Comment!
  • Market Notes: Semis Keep On Truckin' -- June 17

    Tech stocks have been lagging the market but lately they've been playing catch-up. Regarding the major averages, the biggest movers today were the tech heavy Nasdaq (+0.4%) and the small-cap Russell 2000 (+0.8%). These indices got a big boost from internet stocks and especially the semiconductors. We've been noting how the Semiconductor etfs (SMH, SOXX) have been advancing along with the oil producers. However, the latter group has finally decided to take a break leaving the semis to do the bulls' heavy lifting. And it's really no wonder since a lot of M&A (mergers & acquisition) activity has been happening in this area and judging by the heavy trading volume, it appears as if investors are betting that the consolidation will continue.

    Today, sixteen stocks hit new highs in the semiconductor space. (This is a lot.) Here are some of the more technically compelling names on that list:

    Breaking out to new highs: Atmel (ATML, $9.6), Infineon (IFNNY, $12.56), MA Com (MTSI, $23), and Synaptics (SYNA, $90.3). (Actually, Synaptics broke out last week.)

    Stocks in strong up-trends: Amkor (AMKR, $12.2), Spansion (CODE, $22), and Monolithic Power (MPWR, $42.4). All of the their charts appear to be over-extended and if you're looking to build a position in one of them, I'd wait for a pull-back.

    My technical favorites: Rambus (RMBS, $14.6) and Sunpower (SPWR, $40.2). Sunpower has been trading sideways since October before finally breaking overhead resistance at $35 a couple of days ago. It did so on strong volume--a very bullish sign. In mid-March, Rambus broke out of an eight month base before moving on to consolidate at a higher level where it spent a month and a half digesting its gains. Last week, it popped out of this consolidation pattern and continues to notch new highs.

    Jun 17 5:21 PM | Link | Comment!
  • Market Notes: Bears Come Out Of Hibernation On Oil Disruption Fears -- June 12

    Market Notes (4:30pm ET): Anytime the spectre of political unrest arises in an OPEC country, investors flee risk (aka stocks) and put their funds into safer havens, typically oil, precious metals, and bonds--and that's exactly what happened today. Three of the more popularly traded oil exchange-traded vehicles--OIL, DBO, USO--all broke outwith 2% being the average gain (that's a lot for these guys).

    Gold and other precious metals have been flagging in recent months but they all reversed course about a week and a half ago (some folks must have guessed something was going to happen in the Mid-East). Today, both the Gold Miner etf (NYSEARCA:GDX) and the Junior Gold Miner etf (NYSEARCA:GDXJ) tore through resistance levels on twice the normal trading volume. Two Canadian gold miners, Detour Gold (DRGDF, $12.25) and Osisko MIning (OSKFF, $7.91), both hit new yearly highs on heavy volume. Judging from the bullish patterns in all of these charts, it sure appears as if the gold miners are in the early stages of a recovery.

    Turning to the movement in the major averages, the fact that the Dow Transports (DTX) lead the way down and closed below 800 support does not bode well for the bulls. While the S&P 500 and the Dow Industrials were barely able to hang onto support, the tech-heavy Nasdaq and the small-cap Russell 2000 slipped below their support levels. Another nail in the coffin for the bulls is that for the past week the VIX has been slowly rising off of a multi-year low, and today was the first time it closed above the 12 mark. An escalation in Mid-East tensions will certainly increase market volatility--hope you bought some put protection last week when options were cheap!

    Jun 12 4:54 PM | Link | Comment!
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