The Week Ahead: Avoiding The Big Money Blues |
|
May 22, 2016 |
May 2016 Bond Updates
|
It has been a choppy week in the stock market as after Monday's sharply rally stocks grinded lower before turning higher on Friday. Even though the stock market has failed to break to the downside this week, most but not all of the daily studies still indicate that the market is still in a corrective mode.
This was based on my analysis of the A/D data which has done an excellent job of keeping me on the right side of the market for many years. This analysis is detailed in the Market Wrap section of each Week Ahead column so you can follow along to see what signs I am looking for to change my outlook. The daily signals have to be viewed in the context of the weekly analysis as when both are negative it can signal a more severe market decline. That was the case last summer and early this year.
This A/D analysis allows me to rate the market outlook as positive, neutral or negative. When the market is in the positive mode the market leading ETFs and stocks can easily record double-digit gains in 4-6 weeks as was the case after the February lows. Investors following the Viper ETF Report closed out longs in the Materials Sector Select (XLB) last week for over a 17% profit.
The correction warnings of course can just be a sign that the market is merely consolidating or undergoing sector rotation. The regular monitoring of the A/D lines can then alert the analyst when the market has resumed its major trend.
Much was made last week of the news that one of Berkshire Hathaway's managers had invested $1 billion in Apple (AAPL). Coincidentally AAPL did show up on last Monday's Viper Hot Stocks buy list before the Berkshire news hit the tape.
Many investors and traders at one time in their careers have taken a position in a market because that is what the "big money " was buying or selling. A new position established by a high profile investor, hedge fund or money manager is often reported by the press or in an SEC filing.
As I noted in a recent article on the hedge fund bubble the stocks they favor generally do worse than the major averages. Since last October I have commented that I could not understand how a mutual fund or hedge fund could justify such a grossly overweight position in Valeant Pharmaceuticals International (VRX). Should be following the "big money" investors?
|
|
View more at: http://www.forbes.com/sites/tomaspray/2016/05/21/the-week-ahead-avoiding-the-big-money-blues/
|