Avoid SPY In This Stock-Picker's Market

Mar. 26, 2015 4:33 PM ETSPDR S&P 500 Trust ETF (SPY)19 Comments

13.12K Followers

Summary

The weight of the Fed's plans for this year is limiting upside for the broader stock market.
Yet, each time SPY marks its 100-day moving average it usually finds support.
The broader market could be range-bound through September or the entire year as a result.
Investors would do better seeking out individual stocks that bear the cost of systemic risk, which they can later overcome through their operational performance or alpha.
Avoid the SPY in this stock-picker's market.

The stock market is at a crossroads today. Through 2015, I see a stock-picker's market developing because of the plans of the U.S. Federal Reserve, which should stymie stocks on average. That means the market tracking the SPDR S&P 500 Trust ETF (NYSE: NYSEARCA:SPY) has less gusto, and could continue to trade range-bound through 2015. However, that is every stock-picker's ideal environment, where broader market concerns place their best ideas on sale.

The issue limiting S&P 500 upside is the weight of the Fed's monetary policy plans for this year. Stocks have a block against them as the market anticipates the first Fed rate hike this year, which in my opinion will come in September after the dollar has backed off some from the euro. The specter of rising interest rates and the coming increase in the cost of capital to American corporations makes the road ahead a harder go for companies. Returns must improve to overcome the rising cost of capital so that companies can generate the same level of economic value creation. If it gets harder for companies to create value, then the market value which reflects this will have a drag to it as well.

In the short-term, after breaching its 100-day moving average, the broader market could recover as it has in the past. However, further deterioration of the situation in Yemen or Greece could send stocks to test the 200-day average. While today's mark for the SPDR S&P 500 appears to offer good entry level if one believes these risks will abate, the full-2015 upside may be limited for the broader market, nonetheless.

The market is at a crossroads, and I believe investors are better off looking for individual stock ideas that are bearing systemic cost now, that they will later overcome as they report their earnings. Short-term profits may be easily attainable for day-traders from here, but long-term interests should seek out story stocks on sale in my opinion. I'll do my best to present some such ideas via future PRO submissions or publications to my blog, but recent picks of mine have included Facebook (NYSE: FB), Bank of America (NYSE: BAC), the Global X FTSE Greece 20 ETF (NYSE: GREK) and gold; each has its own company specific reasoning you can find at my column.

1-Year Chart of SPDR S&P 500 at Seeking Alpha

The SPDR S&P 500 is again retesting its 100-day moving average. It's a test the SPY has passed time and time again, but even so, recent rallies of the S&P 500 have been short-lived. The latest rally, post the Fed's dovish monetary policy statement, was stymied in my opinion by the specter of inflation stirred up through the recent Core CPI uptick. Today, Saudi Arabia's bombing of Yemen, with ground troops on the way, have stocks confirming the downturn. There's just another 2% of downside to the 200-day moving average for the SPY, but the market tracker does not seem to have the stomach for it given its stall today at the 100-day. It would take another surprise for stocks to sink further, which is entirely possible. Don't look for it in U.S. economic data though.

In my opinion we are starting to exit the dreary winter period, as I am starting to see green sprouts in fresh economic reports. More frequent consumer reports are showing something is developing. This week, Redbook's same-store sales measure showed an uptick in sales to 2.8% year-to-year. Bloomberg's Consumer Comfort Index, which is a weekly take on the consumer mood, spiked higher today. Tomorrow we get the Reuters/University of Michigan Consumer Sentiment measure, and economists expect an improvement to 92.1, from 91.2 at the start of March. Sentiment had declined all through the winter, but spring has sprung, and consumers are saving a significant amount of money on gasoline. You would expect the flow of good news I see coming to serve stocks, and it normally would, but news that is too good these days could spur the Fed into faster action.

Stocks are at a crossroads. Every reason they find to appreciate is short-lived because of the weight of the Fed. Yet, every decline to the historical trend lines draws capital from investors and supports the value of the market. Thus I say, let others make the market decision, and seek out individual names to best navigate this stock-picker's market. Fantastic stocks are being discounted by the market's concerns, and this offers investors an opportunity to benefit from broader market indecision. So, avoid the SPDR S&P 500 and other broader market investment vehicles, and instead seek out great individual stocks. I cover the SPY and the market regularly and invite interested parties to follow my column here at Seeking Alpha.

This article was written by

Markos Kaminis

13.12K Followers

Markos N. Kaminis generated a 23% average annual return on "Strong Buy" stock selections over 5 years while working as a Senior Equity Analyst on Wall Street. As an internal whistle-blower, I sacrificed absolutely everything to do the right thing. And despite being an eyewitness and victim of terrorism on 9-11, I am currently volunteering at a busy border crossing helping Middle Eastern & North African refugees, most displaced by war or other horrors, to land safely in Europe. Despite my life experiences, I still have hope, and believe that we must persevere with patience (forgiveness), tolerance and love. I have determined to struggle for the better good of my brethren rather than for myself, and you'll see that play out over the course of the rest of my life. But I worked far too long and hard to become an excellent stock-picker to not incorporate this work into the fold. Markos N. Kaminis generated a 23% average annual return on "Strong Buy" stock selections over 5 years and ranked 2nd among a group of 60 analysts in-house as a Senior Equity Analyst over a seven-year period at Standard & Poor's. After proving his value in-house, he was promoted into a special role as an idea generator, supporting the portfolios of institutional clients as well as driving performance within S&P's recommended lists and portfolios. At times, Markos was responsible for up to 10% of the firm's entire "Strong Buy" list and is due a great deal of credit for the group's outstanding performance during his tenure. Markos followed a group of 30-40 Small and Mid-Cap firms, and was charged with finding new buy and sell candidates across industry sectors. He generated a 23% average annual return over five years on his "Strong Buy" recommendations, and 26% over three years ended 2004. He was ranked 1st of 60 analysts in-house for his "Strong Buy" performance over 4 years (2nd over 5). Markos also authored IPO research and wrote for high-level newsletters, The Outlook, Equity Insights and Emerging Opportunities, as well as for BusinessWeek Online. He represented his firm as an analytical expert commentator for major media, including television, Internet and through quotes and interviews in reputable publications. Besides predicting the stock market correction of 2015 through a series of prescient reports here in August. (see proof here: http://seekingalpha.com/article/3482226-investor-who-predicted-the-stock-market-correction-offers-an-update ), Markos also advised investors to buy stocks at the bottom of the market in mid-February 2016 and again post-Brexit at the trough, and to buy gold in January 2016 before the commodity started its move higher. More recently, he called the pickup in the economy for 2018, the upward move for stocks in 2018, and the breakout in oil, starting in June of 2017. See: June 15, 2017 – Buy Oil Back Now; August 1, 2017 – Why Oil Prices Will Break Out – The Demand Driver; September 30, 2017 – Why Oil Prices Can Break Out Part II: Vulnerable Supply; and January 26, 2018 – Up 44% Since Our June Bullish Turn – Oil Still Supported Here. While not perfect, over the years, Markos has made countless correct market and security calls for his followers, including forecasting the demise of J.C. Penney on the heralded CEO hire's disruptive plans, the bankruptcies of Washington Mutual and Pilgrim's Pride in the $30 and $20s, respectively, as well as the purchase of Facebook in the mid-$20s when it was considered a pariah post its IPO (today it is a market darling). Markos also warned of the real estate market collapse and the financial crisis in the early days of his blogging. What I personally want you to know about my plans: After witnessing the worst of Wall Street firsthand and having the ideal vision of my childhood career choice corrupted by reality, I almost switched to full-time charity work at age 40 and still have plans for several non-profit endeavors. The future is somewhat unknown, and I am open to employment offers for portfolio management or other ideas. While continuing to publish regularly, I expect to begin work on several book ideas that I believe are important for business, for our nation and for society. I may put my stock selection skills, earned through blood, sweat and tears, to better use, and to make my own way. I would like to give investors something rare, a dignified partner who can manage money with integrity and a clear conscience about the degree of due diligence behind investment decisions... someone who cares more about your money than your wife. I hope readers will become followers of my column here & at my blog, so that when our numbers are substantial, we might start an investment fund or two. Prior to his Wall Street career, Mr. Kaminis spent time in the back-office, as a mutual fund accountant, where he managed for a time the work of two men. Before this, from age 11 to age 25, he worked as a carpenter's apprentice and carpenter with his father, in both commercial and residential projects. Mr. Kaminis has an intimate knowledge of the real estate (undergraduate degree in Real Estate and Finance) and construction market, as well as the restaurant industry. However, as a generalist stock analyst, he showed the ability to learn any and the most complicated of industries in short time - and he gamed every challenge presented to him. Mr. Kaminis earned his MBA at the Katz Graduate School of Business at the University of Pittsburgh, and his BA at Temple University in Philadelphia. However, Markos has been studying the stock market since age 13, when he determined his career path. He made his first investment at age 16, and funded much of his undergraduate education with the proceeds of his investing success. Mr. Kaminis continues to keep busy forecasting the economic path and securities market activity. Markos is considering the eventual start-up a long/short capital appreciation hedge fund. Such a fund would limit risk through beta reduction, using a diversification strategy targeting sector & industry and long & short position inclusion. At the same time, Markos' theoretical fund would seek maximum capital appreciation through the exploitation of Mr. Kaminis' inherent economic & market discernment gift and proven stock selection skills. Mr. Kaminis also has a team of a select few analysts, technicians, strategists and economists that he has been impressed by over the years, which he expects to tap for the project when the time is right. Mr. Kaminis welcomes your interest in such a potential forward effort, and looks forward to discussing his plans with those appropriate and within legal constraints. Markos toys with very early stage entrepreneurial efforts in the testing of certain business models, all of which he intends to tie to a planned non-profit project serving the most helpless among us. The tie will be that the businesses will give employment opportunity to individuals who would otherwise have difficulty finding gainful employment. It will house and heal the homeless, ex-convicts, those completing rehabilitation efforts for drug and other addictions, and others in need of help. Markos is currently Directing the widely syndicated blog he founded, "Wall Street Greek," and is writing for other well-known publications besides advancing several big ideas. Markos' column is syndicated across sites like the Boston Globe, Kiplinger Magazine, UPI and other reputable newspaper and TV websites, as well as private networks, Amazon Kindle, iPhone and more. In the past, he has written for RealMoney.com, Motley Fool and others. Requests to research specific companies are welcome, as we serve our readers. You may contact us via this blog's contact info. Mr. Kaminis welcomes you to follow him here at Seeking Alpha, where he is proud to be a long-time contributor to this strong team of writers. He considers the Seeking Alpha team and management close friends, and for you, people worth knowing and following. Visit his site: Wall Street Greek (http://www.wallstreetgreek.blogspot.com/)

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Avoid SPY In This Stock-Picker's Market

Summary

Recommended For You

Comments (19)