NOTE our SPECIAL OFFER for TimingCube subscribers
at the bottom of this week's FAQ of the Week!
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Current Signal Performance
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Turbo Signal
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Trade Date
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Turbo Model Returns (Long & Short Strategy)
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Nasdaq 100
(QQQ)
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Russell 2000
(IWM)
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S&P 500
(SPY)
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Classic Signal
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Trade Date
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Classic Model Returns (Long & Short Strategy)
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World
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Nasdaq 100
(QQQ)
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Russell 2000
(IWM)
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S&P 500
(SPY)
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Another Eurodebt panic greeted investors Monday morning. Italian and Spanish bond prices plunged during Europe trading providing new fuel to already heightened investor worries that the ECB and European leaders broadly are still behind the curve in containing Europe's debt crisis. Down sharply early, stocks pared losses throughout the day with Apple hitting a new high ahead of earnings. The riskier Russell 2000 gave up 1.55% on the day, while Apple helped the Nasdaq 100 to a relatively modest 0.5% dip. Strong earnings from IBM and Coca-Cola set a positive early tone for stocks Tuesday. As the day progressed apparent progress on domestic debt ceiling talks added further fuel to a solid rally. All indexes cleared a 1% gain for the day with the Nasdaq Composite delivering a 2%+ reward. After-hours Apple gave investors even more than they hoped in a delicious earnings report. While Apple popped by more than 3% on Wednesday, the broader market gave back a fraction of the Tuesday surge as investors realized the deal to raise the U.S. debt ceiling is not yet final. Two of most beleaguered areas of the market came through Thursday to drive stocks higher. Word of a European debt pact joined good earnings from finance firm Morgan Stanley to lift stocks upward. A positive slant to earnings from Microsoft and McDonalds kept bulls on the offensive Friday. It turned out to be just those two groups - tech and consumer - that participated, however, as lackluster notes from industrial leader Caterpiller cast doubt on the other sectors of the market leaving the Dow Jones red for the day and the S&P 500 flat. For the week overall, large-cap tech stocks added to their string of earnings-fueled power. Google, Apple, Microsoft, and IBM have all surged on those earnings giving sustenance to hopeful bulls that the 5-month range-bound stock market might be ready for its next burst upward.
The S&P 500 (SPY) advanced 2.19% for the week to regain last week's losses. The Russell 2000 (IWM) picked up 1.50%. Those powerhouse tech stocks left the Nasdaq 100 (QQQ) at a new high for 2011 after adding 3.03% this week. The Nasdaq 100 and Russell 2000 pushed further above their 50-day and 200-day moving averages while the S&P 500 retook its 50-day this week and remained above its 200-day moving average.
Our World portfolio also had a strong week notching a 1.53% gain on the week consistent with its two domestic holdings, IWM and MDY. With our World portfolio currently filled with Asian and U.S. indexes, this week's stronger Euro offered no immediate benefit for us.
Both our Classic and Turbo Models remain on Buy signals.
On the verge of a breakout?
There are few sports moments more exhilarating than the breakout -
the burst from behind the pack into clear space. At the point of the
breakout, it seems there is "nothing buy daylight" (as american
football commentators often phrase it). This week, Apple delivered
another stunningly superb earnings report to break that stock from
a months-long consolidation and into "daylight." As a heavy
player in the Nasdaq 100, Apple's good fortune gives rise to Turbo's
most favored index leaving it banging on the door of resistance yet
again. No breakout just yet for the 100, but the battering ram might
just find a weak spot and blast through. Chart 1 and Chart 2 below set the
stage and show the daylight ahead if such a breakout can occur.
Chart 1: Nasdaq 100 pounding once again on resistance
Chris Kimble provides a wonderful look at the recent channel of the
Nasdaq 100 in a broader multi-year context.
Chart 2: Can the Nasdaq 100 break into daylight?
In cyclical bull markets, we expect bullish resolutions. Thus, we
expect this breakout to occur. It's obviously not a given and there
have been plenty of storm clouds keeping the daylight at bay. Some
of those clouds might be parting this time around.
Speaking of Apple, the fine folks at Bespoke recently posited an interesting
what-if. What if the Dow Jones Industrial Average had chosen Apple
instead of Cisco Systems back in 2009 when General Motors was removed
from the index? The answer, shown in Chart 3 below, says that the
Dow would be a good 10% higher than it is now.
Chart 3: Put an Apple in the Dow Jones Industrial Average - DJI vs. DJI with AAPL instead of CSCO: 2007 - 2011
At the time, Cisco was at the hub of all things networking with a
big presence in wireless communications as well as the internet. However,
a series of missteps have sent Cisco down almost 20% since it was
added to the Dow while Apple has surged over 160%. With this week's
move higher, Apple is approaching Exxon as the world's most valuable
company, at least in terms of total stock market value. Yet, it still
only trades at a 13 forward P/E, hardly overpriced assuming the earnings
projections hold up, but indicative of the broadbased caution of the
investment community (the negative sentiment among investors that
we so often speak of).
We obviously have no idea whether stocks will break through here,
or sink back into the doldrums yet again. All we know is that our
Models like what they see right now, have Buy signals across the board
(which admittedly were a little bit ahead of the market), earnings
look to be pretty healthy yet again, multiple individual stocks are
breaking out to new highs, the debt situations look due for at least
a temporary vacation, and maybe, just maybe that's daylight we're
seeing up ahead.
Question: Can I trade individual stocks using your Classic
and Turbo signals?
Several studies have attempted to discern how much of an individual
stock's movement is due to market factors, its sector movement, as
well as its individual company performance. Most of these studies
conclude that about 70% of a stock's moves are driven by what the
market is doing. We see this most clearly on days where the broad
stock market is well higher or lower. On those days, relatively few
stocks will be moving the other way, regardless of their news. This
herd behavior has likely increased over recent years with many investors
buying baskets of stocks via index/sector mutual funds, then passive
index ETFs. Since our signals are focused on the broad market, and
the Nasdaq Composite (for Classic) and Nasdaq 100 (QQQ) (for Turbo) in particular,
we think our signals provide a reasonable overview of the health of
the broad market.
This relative good or bad health should filter down to individual
stocks. For example, our current Buy signals from both our intermediate-term
Classic Model as well as short-term Turbo Model suggest a market that
is more likely to rise than fall significantly. This has been borne
out by the stock market's ability to find support at key moving averages.
Our ETFTide service or TradeGuru
can lead the way to some good sector or individual stock names to
consider. For example, ETFTide continues to favor oil services, a
group which has seen strong recent performance from key members Halliburton
(HAL) and Schlumberger (SLB). The TradeGuru also likes oil companies,
pointing to values in Chevron (CVX), BP, and Statoil (STO) as large
players who have either recently broken out or are coiling up for
their next move.
If the market is healthy, it becomes a matter of where the best opportunities
lie. For investors who like to dig down a bit more, there are good
ways to combine our services to build a varied portfolio consisting
of broad market ETFs, strong performing sectors, and good-looking
individual stocks. Using the services as a built-in drilldown mechanism
- e.g. Classic/Turbo + ETFTide + TradeGuru - gives investors a good
toolkit to spice up their portfolio by adding a combination of holdings.
To encourage you to try out this complementary set of tools, we are giving TimingCube subscribers a special $100 gift certificate to each of the ETFTide and TradeGuru services. Simply sign up per usual at the website and drop us an email letting us know you are a TimingCube subscriber. We will apply a $100 discount to your first year's rate. Note that this week, all ten of the stocks in TradeGuru Folio B rose with an average gain in excess of 4%, further demonstrating the underlying positive tone to this market. If the market does break into daylight as described in our weekly update above, owning some of the market's most attractive sectors and stocks could give your portfolio that added boost.
Warm wishes and until next week.
The TimingCube Staff
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