A short-term head-and-shoulders pattern is starting to look like it could have long-term and ominous significance for the stock market. SPY Turned Back by a Gap In last week’s Market Outlook, I highlighted a head-and-shoulders top that had formed in SPDR S&P 500 (NYSE: SPY). The price target for that pattern had been achieved and SPY was moving toward resistance defined by a gap. The gap is… Read More

A short-term head-and-shoulders pattern is starting to look like it could have long-term and ominous significance for the stock market. SPY Turned Back by a Gap In last week’s Market Outlook, I highlighted a head-and-shoulders top that had formed in SPDR S&P 500 (NYSE: SPY). The price target for that pattern had been achieved and SPY was moving toward resistance defined by a gap. The gap is at the neckline of the head-and-shoulders, giving it additional significance. That chart has been updated to include the most recent price action. After meeting resistance, SPY fell and ended the week down 1.78%. Small-cap stocks fared worse with iShares Russell 2000 (NYSE: IWM) falling 2.7%. Small caps often lead the market at turning points. Both indexes are more than 4% below their all-time highs reached in the first week of August.#-ad_banner-# This is still a rather shallow pullback, but… Read More

By some measures, stocks just suffered their worst week in 2013. Despite that setback, the S&P 500 is less than 3.2% from its all-time high. Until prices fall further, the weight of the evidence shows stocks are still in a long-term uptrend. SPY Nears Support SPDR S&P 500 (NYSE: SPY) fell for the second week in a row, losing 2.06% last week. Other major market indexes were… Read More

By some measures, stocks just suffered their worst week in 2013. Despite that setback, the S&P 500 is less than 3.2% from its all-time high. Until prices fall further, the weight of the evidence shows stocks are still in a long-term uptrend. SPY Nears Support SPDR S&P 500 (NYSE: SPY) fell for the second week in a row, losing 2.06% last week. Other major market indexes were also down as traders reacted to news that was generally considered to be negative. Among the most important news stories was that a number of companies, including Cisco (Nasdaq: CSCO) and Wal-Mart (NYSE: WMT), lowered their outlook for the rest of the year.#-ad_banner-# Even good news was bad news to traders last week. Retail sales exceeded expectations, and the number of initial unemployment claims fell to a six-year low. The problem with good news is that the Federal Reserve… Read More

Interest rates could be the factor that finally triggers a sell-off in the stock market, and that sell-off could be closer than most traders think. Interest Rates Can Impact Stocks In studying the recent market plunge in Japan, I had a feeling that I was missing an indicator that should have warned of the risk. The Nikkei 225 benchmark… Read More

Interest rates could be the factor that finally triggers a sell-off in the stock market, and that sell-off could be closer than most traders think. Interest Rates Can Impact Stocks In studying the recent market plunge in Japan, I had a feeling that I was missing an indicator that should have warned of the risk. The Nikkei 225 benchmark index fell as much as 14.97% from its high in a week.#-ad_banner-# I think I found that indicator and was shocked to discover the exact same setup exists in the United States right now. As a trader, it is important to change positions when the facts change, and after months of bullishness, I am moving to a cautious position in the stock market. In Japan, officials attributed the sell-off to disappointing economic news from China. But news rarely causes an immediate change in the trend of a market. Sell-offs related to news events usually occur when the market… Read More

After another big gain, the S&P 500 closed in overbought territory for the first time since October. Overbought, But Not A Sell Signal To define overbought, the 52-week rate of change (… Read More

It is an oversimplification to summarize George Soros’ investment philosophy based on the theory of reflexivity into a single sentence, but it is useful to think of the theory as telling us that a trend will continue until it reverses. Reflexivity also points out the direction of the trend can be influenced by underlying economic factors and the perception of traders and policymakers about the trend. That makes analyzing trends more complicated because we need to… Read More

It is an oversimplification to summarize George Soros’ investment philosophy based on the theory of reflexivity into a single sentence, but it is useful to think of the theory as telling us that a trend will continue until it reverses. Reflexivity also points out the direction of the trend can be influenced by underlying economic factors and the perception of traders and policymakers about the trend. That makes analyzing trends more complicated because we need to consider what policymakers might do and how traders will react in addition to prices.#-ad_banner-# The entire global economy might be thought of as a group of trends under the theory of reflexivity. What happens in the U.S. affects Japan, for example, just as policies in Japan have an impact on the U.S. These effects can be seen in exchange rates, a market in which Soros has demonstrated mastery. His most famous trade — a bet against the Bank of England — made him $1 billion in one day. Read More

So far this year, stock market gains have been driven by price-to-earnings (P/E) ratio expansion. That could change in the second half of the year. Earnings Growth Could Add To Market Gains Second-quarter earnings have been coming in slightly better than expected. Nearly two-thirds of companies reporting so far have beaten expectations. Earnings per… Read More

So far this year, stock market gains have been driven by price-to-earnings (P/E) ratio expansion. That could change in the second half of the year. Earnings Growth Could Add To Market Gains Second-quarter earnings have been coming in slightly better than expected. Nearly two-thirds of companies reporting so far have beaten expectations. Earnings per share (EPS) for the S&P 500 index are on track for 3.9% growth compared with a year ago. With growth being so slow, many analysts are worried about a potential market decline. As usual, concern grew when major indexes dropped from all-time highs last week.#-ad_banner-# After losing 1% last week, SPDR S&P 500 (NYSE: SPY) is still up about 23.5% on a total return basis in the past 12 months. Total return has come from earnings… Read More

Stock prices reached new highs last week as headlines warned of a weak economy. This might be an illustration of the old saying that “bull markets climb a wall of worries.”… Read More

Income investors have two equally important objectives when it comes to investing — obtaining high amounts of income and limiting risk. Many survivors of the 2008 bear market learned this the… Read More

The efficient-market hypothesis isn’t perfect, but it is useful.  According to the EMH, market prices reflect all available information about the future. In other words, the stock price of Apple (Nasdaq: AAPL) includes the best guesses of iPhone and iPad sales trends from millions of investors. Individually, any prediction is just as likely to be wrong as it is to be correct. Collectively, the predictions are often fairly accurate. Available information can change suddenly, and that is why we often… Read More

The efficient-market hypothesis isn’t perfect, but it is useful.  According to the EMH, market prices reflect all available information about the future. In other words, the stock price of Apple (Nasdaq: AAPL) includes the best guesses of iPhone and iPad sales trends from millions of investors. Individually, any prediction is just as likely to be wrong as it is to be correct. Collectively, the predictions are often fairly accurate. Available information can change suddenly, and that is why we often see large price changes when earnings are announced. If a company reports earnings that are better or worse than expected, the market needs to incorporate that information into the current price. As millions of traders make their best guess about what the new information means, we often see gaps on price charts showing their excitement or disappointment.#-ad_banner-# The efficient-market hypothesis extends beyond stock markets and applies to commodities and financial futures as well. Changes in interest rates, for example, are seen when… Read More

Earnings are supporting higher stock prices, and new records for the S&P 500 seem within reach. S&P 500 2,000? SPDR S&P 500 (NYSE: SPY) ended the week virtually unchanged. Friday’s close of $169.11 was only 6 cents below the previous week’s close, a difference of 0.04%. It was a relatively dull week with the difference from the low to the high being only 1.38%. Since the bull market… Read More

Earnings are supporting higher stock prices, and new records for the S&P 500 seem within reach. S&P 500 2,000? SPDR S&P 500 (NYSE: SPY) ended the week virtually unchanged. Friday’s close of $169.11 was only 6 cents below the previous week’s close, a difference of 0.04%. It was a relatively dull week with the difference from the low to the high being only 1.38%. Since the bull market began in 2009, the average weekly range of SPY has been 3.38%. Earnings continued to come in above expectations, and quarterly earnings for companies in the S&P 500 are on track to reach an all-time high. Analysts are optimistic that this trend in earnings should continue for at least the next year, expecting earnings per share (EPS) for the stocks that make up the S&P 500… Read More