Home About Archives RSS Feed

@theMarket: Investors Reach for New Highs

By Bill SchmickiBerkshires columnist
The stock market won't quit. It has been on a tear since the day after Christmas. It feels like it wants to keep climbing. That would be a fairly simple feat at this point, since we are only a percent or so away from regaining those historical highs. What will happen once we get there.?
 
You may ask why am I so confident that the markets won't just give up the ghost right here, right now? A look under the hood at the underlying sectors that make up the market indices gives me a clue. Let's take the semiconductor sector. Throughout the last year or more, semiconductors, a sub-segment of the technology area of the market, have led stocks higher (and lower) time and time again.
 
Semiconductors made a new all-time high this week. That usually precedes a similar move in the major indices.  In the case of the NASDAQ, we are within spitting distance of the old highs.
 
Other sectors, such as the Transportation Index — trains, planes, railroads, etc. — is nowhere near their historical highs, but that's not unusual. Another positive indicator is that just about all sectors are participating in this rally. The same is true overseas, where even the weak sister of the world, the Eurozone, is witnessing good gains within the European stock markets.
 
Over the last month, as readers are aware, I have repeatedly cautioned that somewhere out there lurks an expected pullback. Remember, we should expect 2-3 such pullbacks in the stock market each year at a minimum. It is the price of doing business in the stock market. A decline of as much as 9-10 percent would not be surprising, although I expect the next drop won't be of that magnitude.
 
In any case, as the markets climb, more and more equity experts that I respect are calling for a time out for the markets. Ned Davis, for example, runs a global research shop that is highly respected. He has a good number of years under his belt calling the twists and turns of the market. In his April research report he recommended that, "we would hold off adding equity allocation until a correction has taken place."
 
Davis worries that global fundamentals are deteriorating. "We will need to see evidence of improving fundamentals" before getting bullish again. Ned also points out that there has been a dangerous rise in complacency. The Ned Davis global sentiment indicators are registering the highest levels of optimism on record, dating back to 2002.
 
The US Advisory Sentiment Indicator, while not as high as the Ned Davis Index, still registered its highest reading in nine straight weeks of gains. It now stands at 54.8 percent, just shy of 55 percent, which indicates an elevated level of risk for the stock market.
 
Remember, however, that the investor sentiment contrary indicator is not the final say in whether the markets continue their run. We are now in the midst of the first quarter earnings season. So far, many of the company reports are coming in better than expected. As a result, despite the cautionary technical signals popping up in the markets, earnings and revenue "beats" are providing support for the bulls, at least for now. 
 
My advice is to just stay the course, since timing a pullback and getting back in would be just too tricky in this market. You would have more luck in Las Vegas, if you want to gamble.
 
Bill Schmick is registered as an investment adviser representative and portfolio manager with Berkshire Money Management (BMM), managing over $400 million for investors in the Berkshires.  Bill's forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquiries to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.

 

0 Comments
     

Support Local News

We show up at hurricanes, budget meetings, high school games, accidents, fires and community events. We show up at celebrations and tragedies and everything in between. We show up so our readers can learn about pivotal events that affect their communities and their lives.

How important is local news to you? You can support independent, unbiased journalism and help iBerkshires grow for as a little as the cost of a cup of coffee a week.

News Headlines
Mohawk Trail Woodlands Partnership Discusses Priorities for Forest Center
Pittsfield YMCA Renovation To Begin In October
Williamstown to Resume Search for Town Manager
DA's Office Holding Town Hall Meetings Across County
MCLA to Distribute State, Federal Funding Directly to Students
North Adams Mayoral Candidates Debate at MCLA Forum
Pittsfield Public Health & Safety Panel Opts Out of Mosquito Control Project
Artist Dorothy Sabean Opens Show at BCC
BBPW announces 2021 Scholarship recipients
Pittsfield Speedskating Club Welcome New Members
 
 


Categories:
@theMarket (386)
Independent Investor (451)
Retired Investor (63)
Archives:
October 2021 (6)
October 2020 (2)
September 2021 (9)
August 2021 (6)
July 2021 (8)
June 2021 (6)
May 2021 (6)
April 2021 (9)
March 2021 (8)
February 2021 (8)
January 2021 (5)
December 2020 (6)
November 2020 (8)
Tags:
Greece Stock Market Debt Metals Taxes Rally Commodities Fiscal Cliff Pullback Debt Ceiling Jobs Europe Federal Reserve Housing Wall Street Interest Rates Oil Stimulus Stocks Europe Selloff Retirement Banks Euro Markets Japan Recession Energy Deficit Bailout Economy Currency Congress Crisis Election
Popular Entries:
The Independent Investor: Don't Fight the Fed
Independent Investor: Europe's Banking Crisis
@theMarket: The Bottom Is In
@theMarket: A Week to Forget
@theMarket: Corrections Are Good for the Soul
@theMarket: Let the Good Times Roll
@theMarket: 707 Days
@theMarket: One Down, One to Go
@theMarket: This Is the Year for Commodities
@theMarket: No More Than 5 Percent
Recent Entries:
@theMarket: Stocks Are Signaling an All-Clear
The Retired Investor: The Fed's Key Inflation Gauge
@theMarket: Markets Snap Out of Their Downtrend
The Retired Investor: Barbie Gets Better With Age
The Retried Investor: Golf Continues to Grow
@theMarket: Markets Are on the Cusp
The Retired Investor: Out of Gas
@theMarket: The Dip Buyers Return
The Retired Investor: Weather Worsens Global Trade
@theMarket: Markets Enter the Danger Zone