Fear & Greed Tr...'s  Instablog

Fear & Greed Trader
Send Message
Independent Financial Advisor / Professional Investor- with over 25 years of navigating the Stock market's "fear and greed" cycles that challenge the average investor. Investment strategies that combine Theory, Practice and Experience to produce Portfolios focused on achieving positive... More
My company:
My blog:
  • Market Update 2/8 -Did 'They' Get Caught Short?  4 comments
    Feb 8, 2014 11:42 AM | about stocks: CVX, CRM, AAP, MU

    I was all ready to note the next key support levels when the S & P broke the "line in the sand " that I previously mentioned at 1770-1775...

    Lo & behold, a rally ensued given the oversold condition the S & P found itself in, and now It may be time to note the next resistance level..

    The 2 day rally has now brought the S & P back to 1796. Above what I envisioned as a "key" reversal level of the closing price on Jan 30th of 1794.. A good part of that rally on Friday might be attributed to the folks that came in and "shorted" the S & P when it broke that key resistance level of 1775 .. Many came out declaring the "top" had been put in. Then there was the cry of a bear market on the horizon and of course they were sure the jobs number would be bad to bolster their short term view..

    Well, they got the "bad" jobs number , but the oversold market dropped the angst over the currency issues and looked at some of the positive data , especially earnings. When the market did not show signs of slowing down in yesterday afternoon, those traders were "caught' and had to make a decision. As the tape action showed with a strong finish , many decided it was best to "cover" rather than get taken to the woodshed once again..

    Now what stands in the way for bulls in the short term is the 50 day MA which is at 1806...

    At the moment there are so many scenarios that can take place from here its not worth going into each one.... Suffice to say the near term may be determined by what ensues in the next few trading days .. Keeping it simple , a breakout to challenge the 1848 level or settling back into a trading range .. with new support @ 1737.. For the record, I haven't dismissed my earlier concerns mentioned last week regarding the technical damage that was done with the rally we just witnessed..

    What is important , what I have mentioned in the past ; keep an eye on Earnings while all of the "noise" is going on.

    To that end the Feb 7th report by Factset Research indicates that 65% of companies that have reported this season (1,100+) have beaten bottom line EPS estimates, while 64% have beaten top line revenue estimates. If these "beat" rates hold, it would be the strongest earnings beat rate seen since Q4 2010 and the strongest revenue beat rate since Q2 2011.

    More positive economic info:

    Here's a link that shows how the eurozone has rebounded, and this is also good news that for the most part was dismissed earlier in the week .


    And on Wednesday morning the ISM Non Manufacturing index report came in better than expected (54.0 vs. 53.7) increasing from 53.0 to 54.0. While the headline index only rose by a point, that was big enough to be the largest gains since last August.

    The following bit of info sits in the background for sure, but its part of the "macro" trend that I have highlighted many times that is often swept under the rug from the community that has doubted the entire recovery from day one.. In my view, it's very positive and shouldn't be ignored..

    Statistics released from the CBO Jan 4th,

    The federal budget deficit has fallen sharply during the past few years, and it is on a path to decline further this year and next year. CBO estimates that under current law, the deficit will total $514 billion in fiscal year 2014, compared with $1.4 trillion in 2009. At that level, this year's deficit would equal 3.0 percent of the nation's economic output, or gross domestic product (GDP)-close to the average percentage of GDP seen during the past 40 years.

    As it does regularly, CBO has prepared baseline projections of what federal spending, revenues, and deficits would look like over the next 10 years if current laws governing federal taxes and spending generally remained unchanged. Under that assumption, the deficit is projected to decrease again in 2015-to $478 billion, or 2.6 percent of GDP.

    By contrast, all federal spending apart from outlays for Social Security, major health care programs, and net interest payments is projected to drop to its lowest percentage of GDP since 1940...

    I have mentioned in the past that "sentiment indicators can change dramatically in a relatively short period of time , and here is the latest on that front ...

    In the last week of 2013, bullish sentiment on the part of individual investors rose to its highest levels since January 2011 (55.06). Now in the span of just six weeks, the bullish camp has been halved. According to the weekly survey of bullish sentiment from the American Association of Individual Investors ( AAII) , bullish sentiment declined from 32.2% last week to 27.90% this week. This represents the lowest reading for bullish sentiment since last April. Closing out 2013, many pointed to the high reading in the AAII bullish sentiment number as a sign of excess optimism in the market. With the bullish camp now thoroughly culled, the excess optimism argument no longer valid.

    So the recent "flush" down has taken care of the "excess enthusiasm" that everyone was concerned about..

    As I indicated last week , many times the Baby is thrown out with the bathwater, and in my opinion (NYSE:CVX) was thrown away last week when it traded down to 109 . I added a bit more @ 110 as this div. aristocrat is relatively cheap @ a PE of 9.6 . I believe we will see a div. increase on the next month or two and that might bring the yield to 4% given the depressed price..

    Two of the sectors I mentioned as favorites for 2014 , The cyclical sectors took a leadership role on Friday as technology and industrials came in with nice gains..

    Two of my favorites for 2014 :

    (NYSE:CRM) picked up @ 51 is now north of 60 and (NYSE:AAP) bought at 109 just had blowout earnings and is now trading @ 125... (CRM) is more of an intermediate holding or trading vehicle.. While (AAP) now looks to be a nice emerging growth story that is being played out.. I own both and just sold the March 65 calls against (CRM) @$2.10 to lower my costs and add some income..


    At times its not a "stock market" but a "market of stocks".. there are bargains out there , individual stock selection can still be rewarded, its just a matter of uncovering the gems..

    I continue to like (NASDAQ:MU) on any pullback to the 23 area ... First target $30 . Highlights from their analyst conference are here:


    So for the moment , sentiment has shifted. Now its a matter of if & when the next "crisis" presents itself and how the market decides to handle it..

    I also noted another fact that may serve as a backdrop , especially if the S & P settles into a trading range .. "Hedge" funds just enjoyed their best month in quite some time in January as they beat the averages.. They woefully underperformed the averages in 2013, but with the new found volatility and the intraday swings they find a platform that suits their style... short at the top end of the range and buy on any oversold condition when the bottom range comes into play .. A strategy that they will deploy if we are in fact setup for a range bound market..

    They can be fickle and can change with the wind, and in my view it's not necessary to join that fickle crowd..

    LT investors need to stay the course, as nothing has changed.

    Best of Luck to all

    Disclosure: I am long AAP, CRM, CVX, MU.

    Additional disclosure: I am long numerous equity positions -- all can be seen here in this blog...

    Stocks: CVX, CRM, AAP, MU
Back To Fear & Greed Trader's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (4)
Track new comments
  • BlueSkyForever
    , contributor
    Comments (3056) | Send Message
    F&G, like your forecast :)


    Today I was listening to a report on CNN about how technology, especially the use of more robots in manufacturing, is causing this current lack of jobs. We have a mismatch of skills, for workers that have lost their job & are looking for a new one, and for recent grads. It's going to take awhile to get people trained, and for people to realize what skills they need to have in order to get a job in the new technology enhanced jobs market. We cannot imagine how much factories & corporate offices have changed. Robots, computers, new technology has revolutionized the workplace. This makes a lot of sense, as we see how few people are getting jobs in the years since 2009.


    Another report was on filing taxes. As more computerization of this task occurs, there is less need for tax professionals. This is bad news for tax accountants, but it is becoming easier for people to file their taxes as the procedures get more & more computerized. Certainly we still need tax professionals for businesses and people with complicated returns….but for the majority of the people out there, their tax return is pretty much the same year after year. For them, filing taxes should get cheaper & easier.


    This is why many people in the US feel like they are worse off since 2009, especially if they are still unemployed, or underemployed. For many US corporations, they have been increasing earnings because of advances in technology, resulting in more efficiency, thus lower labor costs, and globalization - they are selling products all over the world, not just in the USA.


    It's more important than ever to be invested in the stock market. It's one of the best ways you can increase your net worth, IMO the best way. Owning some of the best companies in the world, like (GOOG), (MCK), (QCOM), etc. will ensure that your portfolio keeps expanding & someday you will be able to live off of your portfolio income.


    In the US, we may have to lower expectations for owning a big house, luxury cars, taking expensive vacations, eating out, wearing designer duds etc. Realistically, living on way less than you earn & investing more will give you much more financial security. If you get really good at investing, you could even do that full time & then just work for yourself. A goal I'm aspiring to every day.
    9 Feb 2014, 04:57 PM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (10766) | Send Message
    Author’s reply » Blue,,


    U nailed it, while i have been out of the "corporate" lifestyle for some time now, i still maintain my "ties" to the large corporations through friends..


    The story is the same all over --they ( large corporation) can get away with less . add robotics and overall technology advances like u mentioned, and I believe what we are seeing in this country is the "new" normal when it comes to job creation..


    I also saw that report where tax accountants may go the way of dinosaurs , because of technology..


    A sea change with technology that has been in place for a while now and will continue on its path ..


    And your point of its more important than ever before to be invested in the market , rings true..


    Your goal is achievable , you have a plan and you are on the right path.. :)


    Thanks for the comments
    9 Feb 2014, 05:12 PM Reply Like
  • Bruce Burnworth
    , contributor
    Comments (4093) | Send Message
    "add robotics and overall technology advances" - This all takes memory . . . more memory demand means more profits for Micron! Go Micron!
    3 Mar 2014, 11:18 PM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (10766) | Send Message
    Author’s reply » BB,


    I like that theory !! :)
    4 Mar 2014, 08:36 AM Reply Like
Full index of posts »
Latest Followers


More »

Latest Comments

Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.