The S&P500 index was up 0.7% last week and made a new record high of 315.48 on Wednesday, The uptrend that started October is still in effect, back in October the uptrend started at 285 and is now at 314 ,thus completing a higher than 10% run for two months , not a bad profit provided you are in equity and exposed to large caps as they made most of the run-up, Our forecasting models supported this run to the upside and enabled nice gains in our equity long portfolios.
The market is overstretched and in technically overbought , the earning season is practically over with overall decline in revenue and earnings, so no real fundamental reasons to support such a run to the upside, in fact, the S&P500 reported a decline in earnings for the third consecutive quarter ( down 2.2%),this is clearly a slowdown period that was anticipated by analysts.
We remain cautious for now as we don’t encourage opening new long positions and do encourage the use of hedging strategies to protect the portfolio (see article in alphaoverbeta.net regarding hedging techniques to protect your portfolio using ETFs), despite the fact that we do predict the S&P to reach 320-325 levels ,we are cautious because the market did not make a significant correction since starting to run in October.
Our model portfolios triggered an open long position on RSG(Republic Services), DISCA(Discovery), UDR(UDR) which we forecast are in a good position to breakout to the upside.
We closed SYY(SYSCO Corp.) and LKQ(LKQ Corp) with a nice gain after the breakout was exhausted and the stock moved to the consolidation phase.
These are conflicting and confusing times as the fundamentals are not supporting the technicals, we advise to use experienced services such as ours to find the best route in these confusing times.