US - Market Direction 37 (Oct 15 - Apr 16)

[winston]

This Is Your Final Warning... A 'Significant Reversal' Is Coming

By Justin Brill

The recent rally in stocks is an example of classic bear market action.

And last week, one of Wall Street's most respected forecasters joined Porter in his bearish calls.

In an interview with financial-news network CNBC, JPMorgan Global Head of Derivative and Quantitative Strategies, Marko Kolanovic, said the rally since mid-February has been driven mostly by "short covering," a scenario in which investors race to unwind bearish bets they made while stocks were falling.

Our colleague Jeff Clark agrees. As he told his Stansberry Short Report subscribers last week...

Institutional money managers who were leaning bearish one month ago have been forced to buy, or else risk underperforming their benchmarks. Folks who got overly aggressive on the short side and held on to those positions thinking the market would bail them out rushed to cover their trades.

The average Joe on the street who listens to the talking heads in the financial media finally threw in the towel and bought into the stock market...

Despite the rally, Jeff recently warned Growth Stock Wire readers about some significant "warning" signs. He believes we're likely just days away from a broad stock market sell signal.

This week, we learned drug company Valeant Pharmaceutical's recent troubles aren't only a concern for the credit markets... They could also cause significant losses in the retirement accounts of many unsuspecting investors.

If you're not familiar, the Sequoia Fund is an exclusive, value-focused mutual fund founded by Bill Ruane, a close friend of investing legend Warren Buffett. From its creation in 1970 through 2015, the fund earned annualized returns of more than 14%, giving it one of the best long-term track records on Wall Street.

Because of this elite performance, the fund was extremely popular. It has been mostly closed to new investors for years. But it seems some companies were able to pull some strings and grant their employees access.

According to the Wall Street Journal, more than 50 companies – including Disney (DIS) and Berkshire Hathaway-owned National Indemnity – have offered the fund in their employee retirement plans.

Unfortunately, Sequoia was also the single largest holder of Valeant shares. The fund held as much as 30% of its portfolio in the company's stock. Even after the recent bounce in Valeant shares, the fund is down more than 11% this year... and has underperformed 98% of other funds.

Given the fund's reputation, we were surprised to learn it owns Valeant shares at all... We suspect many of the fund's investors may be equally surprised when they open their 401(k) statements this month.

Fortunately, most stock mutual funds don't make such concentrated bets... But this story is still a great reminder to take a closer look at what you own.

If you've followed our advice and taken a few simple steps to prepare your portfolio, you have little reason to worry today.

If not, consider this your wake-up call. You may not get another chance.

And if you're looking for further evidence that stocks could be headed for a rough patch, consider this...

UBS technical analysts Michael Riesner and Marc Müller have one of the most impressive track records on Wall Street this year. They not only called the recent rally in gold, they also correctly predicted each of the last two stock market corrections. They even called the recent February 11 bottom in stocks, nearly to the day.

So what are they saying now?

They, too, believe the recent rally was simply a bear-market rebound, and not the start of a new bullish trend.

They say the market is set up almost exactly as it was in early February, except from the opposite extreme. In particular, they note that while the market was extremely oversold last month, it's now more overbought than it has been any time in the past six years.

They believe a "significant reversal" is likely to begin soon, followed by another leg lower in an ongoing bear market.

Source: Growth Stock Wire

[winston]

MONDAY

The prior week's move took DJ30 and NASDAQ to resistance and this past week was a rather normal test after a move.

We will get to see the outcome of this choice: up with the Fed or down with the economy.

So, we are seeing what is the stronger market driving force, the Fed with fewer rate hikes but nowhere near more QE, or the economy sliding out from under the market even as some bald pundits claim.

If the market rolls over here it likely rolls over big. If it does not, the risk/reward upside is still overall less than ideal given such a solid upside run. We will need to look at those groups coming off the lows as we have, now including biotechs and perhaps some internet stocks.

Source: Investment House

[winston]

Charts

DJ30 and NASDAQ remain at the key resistance levels after the rally from the February lows.

SP500 and SOX are similarly situated, just not as well defined.

Thursday did not change the analysis one bit.

Source: Investment House

[winston]

MARKET SUMMARY

- Stocks sell further Thursday but then recover to flat. More market buy on the dips or just getting square ahead of the Easter weekend and potential terror attacks?
- Economic data remains disappointing as durables miss. GDP beats, but at these levels it is like comparing a C- to D+
- Same leadership situation, big names getting some money.
- Indices show no relative change so post-Easter tells more of the story of DJ30, NASDAQ resistance.

Stocks started lower in a second session of selling as DJ30 and NASDAQ both touched important next resistance and faltered. Just a bit. Heading into the weekend stocks were faltering some after a good run. DJ30 was off 100ish. It touched the 10 day EMA, however, and reversed. Surprise! Once again they found a bid.

The economic data was again weak early on with Durable Goods February flipping back negative after a brief one-month bump positive (-2.8% versus 4.2%), and capital investment tumbled back negative (-1.8% from 3.1%), continuing the investment downtrend. Even the prior month's gains were written lower from the original report. Lovely.

That appeared to weigh on stocks along with oil as it lost ground, hitting near 38/bbl on the low. Bad news appeared to be bad news.

The Atlanta Fed released a revision to its Q1 GDP forecast, writing it down to 1.5% from the rather wishful 2.7% it first opined. From the yearly average of the past 10 years that was thought to be so good (mind you the first 10 year period below 3% since the Great Depression) to a very European 1.5%.

That woke the market. Hey, this is really bad news. Surely the Fed will not, cannot hike. Possibly after that even more stimulus?

Bad news was bad news as investors and traders bought into the line we are told by the Keynesian economists, the Fed, and the Administration soothsayers about how solid the economy now is.

Reality seemed to take hold and the sentiment turned, however, when the Atlanta Fed revision hit. Even the Fed it seemed, is now not that sure at all if the economy is growing or slowing. Perhaps stimulus indeed.

Source: Investment House

[winston]

Why the Rally Really Stopped This Week

By MICHAEL E. LEWITT

The Atlanta GDPNow model was lowered to a real annual rate of 1.4% for the first quarter last week, roughly half the estimate of early February and strangely even with revised fourth quarter GDP. The Commerce Department reported Thursday that durable goods orders fell in February by 2.8% from January.

Janet Yellen & Co. ignore the 96 million people who exited the jobs market and falsely declare that the unemployment rate is under 5% while claiming that inflation is under 2% while the price of everything except energy (especially healthcare) rises inexorably in the faces of consumers and businesses.

Stocks are expensive, as are junk bonds which are starting to see a significant increase in defaults. Market conditions are unlikely to improve from here.

And then there are those terrorists…

Source: Money Morning

http://moneymorning.com/2016/03/27/why- ... this-week/

[winston]

NEW HIGHS OF NOTE LAST WEEK

Travelers Companies (TRV)... property and casualty insurance
UnitedHealth Group (UNH)... health insurance
Progressive (PGR)... auto insurance
Northrop Grumman (NOC)... defense contractor
Colgate-Palmolive (CL)... consumer basics
AutoZone (AZO)... auto parts
Honeywell (HON)... manufacturing
Masco (MAS)... building materials
Valspar (VAL)... paint
U.S. Concrete (USCR)... concrete
Pool Corp (POOL)... pool supplies
Exelon (EXC)... utilities
First Majestic Silver (AG)... silver miner
Pan American Silver (PAAS)... silver miner
Estee Lauder (EL)... cosmetics
Johnson & Johnson (JNJ)... health care giant
Sysco (SYY)... food-distribution leader
McDonald's (MCD)... fast-food giant

NEW LOWS OF NOTE LAST WEEK

Valeant Pharmaceuticals (VRX)... pharmaceutical firm
AstraZeneca (AZN)... pharmaceutical firm
Teekay Tankers (TNK)... oil shipping
Frontline (FRO)... oil shipping
BP Prudhoe Bay Royalty Trust (BPT)... struggling oil firm

Source: Daily Wealth

[winston]

Stock headwinds persist despite rebound from tough start

by Adam Shell

The list of headwinds that could slow stocks' climb includes continued debate over the timing of the Federal Reserve’s next interest rate hike.

Sluggish corporate profit growth will be another negative story line for stocks, as many U.S. companies continue to struggle to book sales and make money in a world dogged by slow economic growth.

The fact that stock market valuations are currently pricier than long-term historical norms is also likely to give investors pause.

Other sources of uncertainty include the unpredictable U.S. presidential election, the re-emergence of terrorism as front-page news, a still wobbly commodities complex and the possibility of the U.S. dollar gaining strength again and hurting sales of U.S. multinationals.

Yet another negative hanging over markets is growing concern that the world’s central banks are out of ammunition and will have difficulty boosting growth despite ongoing stimulus policies.

Source: USA TODAY

http://www.usatoday.com/story/money/201 ... /82249392/

[winston]

The market is likely headed lower… Here’s what to do

by Ben Morris

Use the current favorable conditions (high stock prices) to reduce risk. Take a hard look at your portfolio. Have you done well on any trades that you don’t need to be holding… or that you no longer have a lot of conviction in?

Be honest with yourself. It’s better to close them now than it will be later if they fall by 5%-10%.

We’re not in a bull market right now… But we have seen a spectacular move higher. The S&P 500 is up more than 11% in the past six weeks.

Don’t confuse your recent profits with brains. It would have been hard for you not to make money in stocks over the past two months. Instead, take advantage of a great opportunity to take some risk off the table.

Source: Daily Wealth Trader

http://thecrux.com/top-analyst-time-to- ... the-table/

[winston]

These Are The Four Reasons Why Investors Never Believed This Rally

By Tyler Durden

Source: Zero Hedge

http://www.thetradingreport.com/2016/03 ... his-rally/

[winston]

Quiet times for stocks tend to end with big drops

by Alex Rosenberg

These quiet periods can last quite a long time. For instance, in the middle of 2014, the S&P moved less than 1 percent for 62 straight sessions.

Source: CNBC

http://www.cnbc.com/2016/03/29/quiet-ti ... =103503962