Impeachment, the Coronavirus virus in China, Japan, South Korea and in the state of Washington, and record-high valuations have some market watchers worried about stock prices.
Guggenheim Partners investment chief Scott Minerd told attendees in Davos that central bank policies are a “ponzi scheme” and that it must collapse at some point. Anne Walsh, Guggenheim’s fixed-income lead, says the Federal Reserve has pumped the market with liquidity, warning “the longer this market runs, the harder the fall when it ends.”
Of course, the stock market goes up AND down. At some point the bull market will end, like they all do. The million, no… billion, no… trillion-dollar question is, “when?” It’s interesting to note that neither Minerd nor Walsh offered a guess as to where the bull’s finish line might be. That brings me to something an early mentor taught me about the market:
“Never make the mistake of believing the market can’t go any higher than this or that the market can’t go any lower than this.” In other words, the trend is your friend. Right now, the trend is up; however, at some point the two Guggenheim Partners will be right. It could be at current levels or it could be Dow 40,000.
Q: Who knows?
A: The Market knows the time and place.
That’s why Investing Trends relies on our Market Models. They will not pick the absolute high or low, but they will pick up on any reversal, just like they did prior to the sub-prime meltdown and subsequent start of the current bull market.
For now, our models remain bullish. There are some signs of weakness. Momentum has turned lower for the near, immediate, and longer-term, but our mo’ model continues to produce a bullish score. Relative Strength readings for the NASDAQ and S&P 500 are more than 70, which tends to be the benchmark score for overbought and usually lasts as long as Donald “Cowboy” Cerrone in a Conor McGregor fight. Meanwhile, our leadership and market type models are firmly bullish.
Investing Trends will continue to work from a bullish platform with a buy the dip mentality until our models tell us the market says it isn’t going any higher than this.
The top five performing sector ETFs for the last week are:
- ETFMG Alternative Harvest ETF (MJ) – up more than 8% in the last week.
- ALPS Medical Breakthroughs ETF (SBIO) – up more than 5%.
- SPDR S&P Biotech ETF (XBI) – up more than 3.5%.
- Utilities Select Sector SPDR Fund (XLU) – up more than 3%.
- And Invesco Dynamic Media ETF (PBS) – up close to 2.75%.
Investing Trends likes to see confirmation, when two (or more) similar sectors score highly at the same time. ALPS Medical Breakthroughs ETF (SBIO) and SPDR S&P Biotech ETF (XBI). The duo compliments our SPDR S&P Pharmaceuticals ETF (XPH) call two weeks ago in this newsletter. XPH happens to be sixth on the performance leaderboard, gaining 2.58% in the last week, i.e. more confirmation.
SBIO and XBI’s charts are similar and hint at the possibility of a new uptrend after starting 2020 on a down note. More aggressive investors might consider SBIO as it trades with far less volume than XBI. Any surge in activity will push ALPS Medical Breakthroughs’ price higher or lower faster depending on whether the heightened interest is selling or buying. Less aggressive investors should consider the heavily traded XBI. Its price should move in smother lines up and down.
Our new uptrend calls would be voided if XBI closed below $92 and less than $40 for SBIO.
With earnings season hitting top full stride next week, we’ll focus on some of the BIG names releasing their financial report cards before we meet again. Here are our estimates for 20 of the most popular companies. That way you can see which companies we believe could top/fall short of Wall Street’s consensus forecasts and possibly pop or drop afterwards.
If you don’t see your companies on this list, drop us an email and let us know. Time permitting, we’ll send you our estimate for your review. At the very minimum, remember this: POST EARNINGS DRIFT. Studies have shown that companies that exceed their forecasts tend to outperform and those that miss expectations tend to underperform for the next 60-days or so.
May all your trades be profitable,