Klein Market Summary-January 28th, 2013

Klein Market Summary

January 28th, 2013

Current Market Facts:

Technical Status  Confirmed Rally Beginning Week 5

Other Observations

Market indices have continued to show resilience, even as heavy weight AAPL continues to plummetLeadership has continued to improve

Feel of the Market

The indices are extended, but may continue to trend higher

Important Levels on Key Indices:

Index

Support

Last Close

Resistance

Nasdaq

3061

3150

3200

Nasdaq 100

2713

2737

2750

S&P 500

1474

1503

1575

 DJIA

13661

13895

14000

Market Interpretation:

The action of AAPL on Thursday showed an uncommon amount of market strength.  It also underscored the end of AAPL’s leadership. AAPL was crushed on Thursday because of its weak earnings report and outlook.  Its leadership is really over because its blistering earnings growth is over and there are no visible catalysts for it to reaccelerate.  It now rests 37% off of last September’s all time highs.  AAPL’s immense weighting left the indices and leading stocks vulnerable to a sell-off, a contagion sparked by the many stocks that are in groups, ETF’s, or supply chains with AAPL.  Remarkably, that did not happen.  Leading stocks rose across the board.  This suggests that money was flowing out of AAPL and into other, new leaders.  It is remarkable that there was not a contagion, but a rotation into new leaders, because most recent rallies had the same old liquid leaders: AAPL, BIDU, and PCLN.  This is an rare sign of strength.

Other important market evidence occurred Thursday and Friday, as NFLX surged 70% in the shortened week.  NFLX reported much better than expected, and it was heavily shorted.  This stock is far from a buy point, and should be watched, but not bought here.  What is important is that a move like this usually only occurs in a very strong market.  Other breakouts have been robust, and the general tenor of the market is strong.

Joel’s Take:

Leading stocks will continue to report earnings in coming weeks, as the indices trend to new highs.  This may provide additional opportunity, but the markets and many leaders are now extended.  It means that new purchases must be spread out over time to avoid getting trapped by a market pullback.

Though the current rally is strong, recent rallies have ended abruptly.  Vigilance is critical.  A strong uptrend often covers investing mistakes, but that is not an excuse to be sloppy.

  • The Klein Market Summary is a professional interpretation of the general stock market conditions that is updated on a weekly basis.  Joel T. Klein is the portfolio manager of the investment partnership Blue Diamond Capital, LP. He writes the summary using select technical and fundamental data.  The Klein Market Summary is not intended to provide investment advice of any kind, and is only provided for the entertainment of the reader.  It is typically updated Monday morning, weekly.  Please e-mail info@kleinasset.com, if you are interested in receiving this free weekly update.
  • Past performance is not a guarantee of future results.  Due to market volatility, a fund’s performance may fluctuate.  Current performance may be less than previous results.  An investment a hedge fund when redeemed, may be worth more or less than the original cost.  Information above is not a replacement for the Fund’s prospectus.  This webpage does not constitute any kind of offer or solicitation.  Additional information on investment objectives and policies is in the Fund’s prospectus.  Ask your representative for a prospectus.
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About kleinmarketforum

Klein Asset Management, LLC, formed in 2003, serves individual investors via a directional growth stock approach. When the market is in an uptrend, the firm seeks to exploit investment opportunities. When the trend is down or neutral, assets are protected. Klein Asset Management undertakes major market research projects. In many cases, these result in improved investment methods, which ultimately improve performance.

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