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After more than 40 years on Wall Street, Marc Chaikin founded Chaikin Analytics LLC in 2009 to deliver proven stock analytics to financial service professionals and individual investors. With the Chaikin Power Gauge, an alpha-generating quantitative model as its centerpiece, Chaikin Analytics... More
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  • Chaikin Market Insights - September 13, 2014

    Friday's High Volume Decline suggests more September Selling

    The S&P 500 Index closed Friday at 1,985.54, down 1.1% on the week. The stock market was resilient this past week until Friday, as early morning weakness was met by buyers who triggered late day rallies. On Friday, the market finally succumbed to profit taking as weakness in energy stocks spilled over into the stronger healthcare and technology sectors which had been leading the market higher.

    There were a number of factors which could be cited as contributing to the market's first weekly decline in 6 weeks such as:

    • new economic sanctions on Russia from Europe and the United States
    • the upcoming Federal Reserve Board's Open Market Committee meeting which culminates in Chair Janet Yellen's press conference on Wednesday
    • and better than expected retail sales and consumer confidence in August, which increases the likelihood of earlier than expected Fed interest rate hikes.

    The real culprit, however, is the deteriorating internal stock market breadth as the S&P 500 Index and the Nasdaq Composite were making new highs in early September. The most compelling statistic to me is...

    Charting the stock market's likely course over the near-term

    The S&P 500 index is...

    What stocks should I avoid and where are the opportunities?

    You have the tools in Chaikin Analytics and the Chaikin Power Gauge ratings to prepare for the opportunities that lie ahead. Sell bearish rated stocks like...

    A few comments about Apple and the impending Alibaba IPO

    Apple (NASDAQ:AAPL) which has had a bullish Chaikin Power Gauge rating since April introduced three new product lines this past week. In addition to the widely anticipated iPhone 6 and iPhone 6 Plus, AAPL introduced the Apple Watch which will be available in 2015 and Apple payments, a mobile payments capability offered in partnership with major credit card companies. The initial indications are that preorders for Apple and their telecom partners AT&T, Verizon, Sprint and T-Mobile are at record levels.

    Of particular interest to holders of AAPL stock is whether Apple will hold the gains made in the last three days and power to new highs above 103.74. History speaks to sideways movement for AAPL after new iPhone launches, but rather use pullbacks to the 96-97 level to add to holdings or establish new trading and investment positions in AAPL.

    Alibaba (proposed symbol BABA) is expected to offer on Friday this week, $22 billion of stock in the largest IPO in history. The offering is already oversubscribed according to Barron's and considered to be fairly priced in the $60-66 range, which may get bumped up to $70 because of the overwhelming demand for the world's largest e-commerce company.

    Since we won't have a Power Gauge rating on BABA for 12 months, let's focus on a very interesting pattern that has been documented by academic researchers. When an industry group experiences a very large IPO like Alibaba's, the rest of that industry group tends to underperform on both an absolute and a relative basis over the ensuing 6 months. Whether this is because of a flow of capital into the new company's shares or a stronger competitive position for the company based on access to the IPO capital is up for debate. What is clear, however, is that Internet stocks will likely...

    ETF Sector Update

    Energy (NYSEARCA:XLE) and Utilities (NYSEARCA:XLU) led the market on the downside last week. The Technology (NYSEARCA:XLK), Health Care (NYSEARCA:XLV) and Financial (NYSEARCA:XLF) ETFs performed relatively well with the XLK finishing virtually unchanged on the week.

    This Week's Earnings Reports

    Earnings reports from some key companies like Adobe (NASDAQ:ADBE), FedEx (NYSE:FDX), Lennar (NYSE:LEN) and Oracle (NYSE:ORCL) will be coming out this week. FDX's report will be scrutinized for clues to the health of the global economy while Adobe and Oracle speak to the health of the technology sector.

    To see all stocks with bullish or bearish Chaikin Power Gauge ratings due to report earnings this week use our Upcoming Earnings Ideas Hotlist in Chaikin Analytics. To find out which of the stocks you follow are reporting, use our Portfolio Health Check, a component of our Power Suite, on your MyStocks list.

    Last Week's Bearish Stock of the Week

    Last week's bearish stock of the week, 3D Systems (NYSE:DDD) finished the week at 52.08 up 1.5%. DDD rallied on takeover rumors but nothing has changed in the long-term bearish case. Use periods of short-term strength to sell DDD.

    Chaikin Bearish Stock of the Week...

    To read the full report, subscriber to Chaikin Power Suite

    Sep 15 11:02 AM | Link | Comment!
  • Chaikin Market Insights - September 5, 2014
    2,000 Level Holds…But There's a Bull on the Cover of Barron's

    The S&P 500 Index closed Friday at 2007.71, up 0.22% on the week. The S&P 500 Index held 2,000 after repeated attempts to reject that level. The announcement by European Central Bank (ECB) president Mario Draghi of an interest rate cut and the prospect of asset backed security purchases beginning in October eased the stock market's fears of an early increase in interest rates here in the U.S.

    The reality of Germany's resistance to ECB quantitative easing means that these bond purchases are not a given. What Draghi's announcement does mean is continued strength in the U.S dollar. The strength in the dollar means lower commodity prices, particularly crude oil, and trouble for U.S. multi-national companies.

    Russia in particular is hurt by lower energy prices as petroleum and natural gas exports are important to their current accounts balance, and also give them geopolitical leverage in Europe and Asia. This was borne out by Russia's recent call for a decoupling of oil and the U.S. dollar.

    This was a function of U.S. and European sanctions on Russia for its role in the Ukrainian political crisis. It also underscores the importance of geopolitical events on the stock market. When an apparent peace treaty in the Ukraine was implemented last week, the stock market had one less thing to worry about. The Russian intervention crisis is far from over, however, and NATO's announcement of a mobile strike force of 5,000 troops speaks to Western fears of further Russian territorial ambitions. This is a wild card that can undermine the stock market at any time but cannot be accounted for.

    I still believe that in September the 2,000 level on S&P 500 Index will be a formidable barrier. There is a bull on the cover of Barron's this week, which is a contrary indicator, and that is not a good omen for the stock market, particularly after a 66 month bull market. Market breadth is not expanding with the new highs in the S&P 500 and the Nasdaq Composite. The Russell 2000 small cap Index failed to make a new high last week, highlighting this breadth divergence.

    Remain skeptical of the market's ability to make further gains from here before a pullback. Once we get a retreat in stock prices we may then expect a robust rally after the mid-term elections.

    Chaikin Power Bars for Major Indexes and NASDAQ Chaikin Indexes

    The Chaikin Power Bar differentials for the major Indexes improved this week across all market segments. The Nasdaq continues to lead, making new 14 year highs along with the S&P 500 Index. The Russell 2000 small cap Index rallied this week but is still lagging the large cap stocks.

    One point that should be noted in the graph below is that the Power Gauge ratings on the component stocks in the three NASDAQ Chaikin Power Indexes (the first three "NQ..." indices in the below chart) launched 5 months ago remain decidedly bullish. This demonstrates the ability of the Power Gauge to sustain itself for extended periods of time and provide an accurate prediction of a stock's potential over the ensuing 3-6 months.

    (Index Power Bars as of 9/4 from Chaikin Analytics)

    What Should I Do with My Portfolio?

    Bullish Power Gauge stocks continue to prosper as favorites such as Alcoa (NYSE:AA), Community Health (NYSE:CYH), Health Net (NYSE:HNT), NetApp (NASDAQ:NTAP), Royal Caribbean Cruises (NYSE:RCL), Skyworks Solutions (NASDAQ:SWKS), Southwest Air (NYSE:LUV) and U.S. Steel (NYSE:X) are at or near new 12 month highs. Take partial profits on bullish Power Gauge stocks when they spike up to new highs and continue to enjoy the ride. Be religious about culling bearish Power Gauge stocks from your portfolio and be prepared for a correction at any time.

    ETF Sector Update

    All sectors except for Energy (NYSEARCA:XLE) and Industrials (NYSEARCA:XLI) performed well this past week. Health Care (NYSEARCA:XLV), Utilities (NYSEARCA:XLU), Financials (NYSEARCA:XLF) and Technology (NYSEARCA:XLK) led the market although the strength in the Utility sector came in the face of rising interest rates which is suspicious.

    (SPDR Sector Chaikin Power Bars as of 9/4 from Chaikin Analytics)

    To read more of Marc's Weekly Insights, visit https://www.chaikinpowertools.com/market-insights.shtml.

    Sep 08 11:54 AM | Link | Comment!
  • Chaikin Market Insights - August 16, 2014

    AUGUST SCHEDULE: I am on vacation through September 1st. We will issue a shortened Market Insights on the following modified schedule the next 2 weeks:

    Thursday 8/21
    Wednesday 9/3

    Enjoy the end of summer and thanks for your support.
    - Marc

    Market Runs into Selling at the Critical 50 Day Moving Average

    The S&P 500 Index closed at 1,955.06, up 1.22% on the week. The market was cruising along with a strong weekly gain and was trading well above its closely watched 50 day average price when the rumors of an Ukrainian attack on a Russian humanitarian supply convoy hit the news wires at 10:30 a.m. on Friday. After a steep 1% decline and a subsequent rally, the S&P 500 closed unchanged on the day, and just under resistance at 1,957.

    The stock market is much more volatile when geo-political risk is combined with low volume dog days of August trading as we saw on Friday. Our belief in a re-test of the August 7th lows of 1,905 in the S&P is less certain given the market's ability to break above resistance at 1,955 before the rumors hit the tape.

    While the possibility of renewed selling is still a concern, it would probably be triggered by a heating up of the Russian - Ukrainian standoff and that is impossible to predict. One clue which suggests that cooler heads may prevail is that the sanctions imposed by the U.S. and Europe are a serious blow to the Russian economy and something that Vladimir Putin may not want to exacerbate. There was talk in the weekend press of Kremlin disapproval with Putin.

    That said, the market will still have trouble getting above 2,000 on the S&P 500 before September. The underperformance of the small-cap stocks suggests that caution is still in order, with rallies presenting a good opportunity to raise cash ahead of the negative September - October time frame.

    The Chaikin Power Bar differentials for the major Indexes improved this week for the S&P 500 Index and the Nasdaq 100, as seen in the graph below. The Russell 2000 small cap Index reverted back to the poor relative performance that it has shown for the past 6 months. The IWM was up only 0.91% on the week and was particularly hard hit on Friday when rumors of a Ukraine attack on a Russian supply convoy hit the tape. The Power Gauge net difference for the IWM actually deteriorated for the week indicating weakness under the cover of the broad market rally.

    (Index Power Bars from Chaikin Analytics)

    What's in Store This Week?

    This week the market will be influenced by four things:

    a. Russia's actions or inaction in the Ukraine
    b. The CPI inflation report due out on Tuesday
    c. The Fed's tone in the minutes of the last Federal Reserve Open Market Committee meeting due to be released on Wednesday
    d. Janet Yellen's keynote address at the Fed's annual Jackson Hole Wyoming conference on Friday

    With many market participants on vacation, expect volatile swings up and down all week.

    ETF Sector Update

    The heavily oversold Utility sector (NYSEARCA:XLU) continued its rebound last week, but the leaders of the broad market rally were Health Care (NYSEARCA:XLV) and Technology (NYSEARCA:XLK) sectors. The Nasdaq Composite reflected that as well; it was up 2.15%.

    (SPDR Sector Chaikin Power Bars as of 8/14 from Chaikin Analytics)

    This Week's Earnings Reports

    Earnings season ended last week when Wal-Mart (NYSE:WMT) reported on Tuesday. It was a positive earnings season, particularly so because expectations were high. More than 60% of S&P 500 stocks exceeded both revenue and earnings expectations, but in general investors used these better than expected earnings reports as an excuse to take profits.

    To read more of Marc's Weekly Insights, visithttps://www.chaikinpowertools.com/market-insights.shtml.

    Aug 18 5:43 PM | Link | Comment!
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