Archive | July 2013

Klein Market Summary-July 29th, 2013

Klein Market Summary

July 29th, 2013

Current Market Facts:

Technical Status

 Confirmed Rally – Beginning Week 4

Other Observations

Distribution is slightly elevated on NASDAQ

Indices remain near highs

Breakouts increase in number

Feel of the Market

Earnings is in focus

Important Levels on Key Indices:

Index

Support

Last Close

Resistance

Nasdaq

3575

3613

3625

Nasdaq 100

3053

3076

3100

S&P 500

1654

1692

1700

 DJIA

15340

15558

15600

 

Market Interpretation:

The uptrend has paused on the NASDAQ.  At this point, I would continue to interpret the action as very favorable as new liquid breakouts add to the breadth of leadership, such as FB and LNKD.  Technology remains in focus, with medical and consumer groups also contributing to the leadership.

Fed policy has been a dominant economic theme.  While quantitative easing is controversial for many reasons, it has been my understanding that the Fed has no effective tools to deal with deflation.  However, they can manage inflation in a variety of ways.  So, rather than have housing deflation contaminate the entire economy, and likely the global economy, they are engineering a level of inflation back into the system.  Other central banks have imitated the move, which suggests that they endorse the logic behind it.

The stock market seems to remain primed, long term, for inflows domestically and internationally.  This may be the beginning of a prolonged period of PE expansion in the market that we have not seen since the 1990’s.

Joel’s Take:

The market seems to be forming a short-term digestion here.  In the meantime, many leading stocks are thriving, suggesting a market breakout to the upside could be the most probable outcome.  It should be said that the digestion could develop into a longer correction, but that doesn’t seem likely given the strength of the leadership.

The Consumer and Technology:

Most of the U.S. economy is consumer-based – about 65%.  In our stock market endeavors, our biggest opportunities usually lie in disruptive, innovative stocks that have a new competitive edge.  The current environment is ripe with opportunities that fit these descriptions.  Many of them are technology stocks, which makes sense, because the nature of what we call technology is that it is always new.  Current leaders in these groups are FB, LNKD, PCLN, TRIP, NFLX, TSLA, SPWR, QIHU, YY, GMCR, YHOO, and CREE.  Many others are poised to break out, but these are probably the leading ones.

It should be said that the biotech and pharma stocks that are leading are also technology based.  They have been flourishing this year, and are continuing their moves, for the most part.

  • 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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Klein Market Summary-July 22nd, 2013

Klein Market Summary

July 22nd, 2013

Current Market Facts:

Technical Status

Confirmed Rally – Beginning Week 3

Other Observations

S&P 500 and DJIA have joined NASDAQ in new high ground

Leadership continues to expand

Feel of the Market

New breakouts are able to extend their gains in this environment
 

Important Levels on Key Indices:

Index

Support

Last Close

Resistance

Nasdaq

3575

3588

3600

Nasdaq 100

3053

3045

3100

S&P 500

1654

1962

1700

 DJIA

15340

15544

16000

 

Market Interpretation:

The uptrend continues with options expiring on Friday.  Friday saw the NASDAQ Distribute as GOOG and MSFT fell off of earnings.  Still, GOOG found support and closed near the high of its range.  With the market back in an uptrend, the focus is on Distribution levels, and the health of leadership.

As the rally continues to unfold, earnings have taken center stage.  In the next few weeks preparation will be a key to catching powerful moves at the right time.  While many leading stocks have broken out, others are poised to do so.

 

Joel’s Take:

Earnings reports are important catalysts for breakouts.  This week may provide several such opportunities.  On the other hand, earnings reports also pose a risk, which can necessitate limiting exposure until the report is released.  The amount of exposure that is prudent to have prior to earnings is contingent upon your position in the stock, the quality of the stock, and your portfolio’s performance.

As we saw in the first quarter this year, when a stock gaps up to new highs on big volume, and a positive earnings report, it is almost always a buy signal, no matter how high it gaps.  These are difficult opportunities to interpret, when emotions get in the way.  Just recently, the gap up in CELG offered an opportunity to get into one of the best leaders of the year.  Buying at highs is counterintuitive, and it does not always work, yet big volume is a n important clue in evaluating trends.

Leading Groups:

In first quarter of this year, housing, construction supply and mortgage financing stocks flew high.  For the time being, they seem to be sitting out of the current rally.  Also, biotech asserted itself a leading group with REGN, CELG, BIIB, and GILD, among others.  The group continues to lead with SNTS, REGN, CELG, and several other potential liquid names.

Tech stocks, and in particular consumer technology seems to be the leading theme in the current market.  These leaders have shown powerful accumulation so far, with many that are poised to breakout: PCLN, NFLX, TSLA, CREE, and YHOO.

Auto makers, green energy, and restaurants are also working themes, at present.  Investing in groups such as the ones mentioned greatly improves probabilities of success.

  • 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.

Klein Market Summary-July 15th, 2013

Klein Market Summary

July 15th, 2013

Current Market Facts:

Technical Status

Confirmed Rally – Beginning Week 2

Other Observations

NASDAQ leads as uptrend resumes

Leading stocks have been breaking out for two weeks

Feel of the Market

The uptrend has returned in earnest, with the best stocks acting with power

 

Important Levels on Key Indices:

Index

Support

Last Close

Resistance

Nasdaq

3532

3600

3700

Nasdaq 100

3053

3079

3100

S&P 500

1654

1680

1687

 DJIA

15464

15340

15542

 

Market Interpretation:

As we take inventory of the current market, let’s focus on the technical action first.  The NASDAQ has now risen 12 of 13 days, with the 12th day of that series, last Thursday, being the Follow-Through Day.  Leading stocks in biotech, finance, and consumer tech have surged.  The NASDAQ is now leading, for the first time since the rally that began at the end of December.

The Follow-Through Day was catalyzed by comments from the Fed chief and by the Fed minutes.  The underlying reason for the recent short-term correction was the escalating fear that the Fed would reduce its Quantitative Easing program too quickly and too suddenly, but the most recent comments assuaged this fear.

Even prior to these comments by the Fed, leading stocks began to firm up.  Leader TSLA broke out on June 27th, nine days before the Follow-Through Day.  PCLN broke out on July 1st, and many others broke out early.  These and other stocks were early clues that the market uptrend was likely to resume.

Joel’s Take:

I would like to take a moment to review how I look at leadership and why.  I generally interpret market leaders as those stocks that are very liquid, trading about $ 100 Million Average Daily Dollar Volume (average volume x stock price) or more, though sometimes they can be thinner.  These stocks are relevant both for trading and for market interpretation.  Market leaders are also under professional institutional accumulation, usually because they have exceptional fundamentals, especially earnings growth.

I prefer to trade liquid stocks because even after several cycles of successful trading, I can still trade with the same style – it is scalable.  Also, these stocks are the ones where there are many institutional sponsors.  These sponsors will provide the eventual exit strategy.

TSLA:

There has been much made about the powerful move of TSLA.  The stock emerged from a long series of bases, culminating in a shallow cup, with a breakout at 40.  At this time, the stock showed negative earnings, though it showed a massive increase in sales as the ground-breaking Model S began to sell.  The stock surged, powered by a strong news flow, a massive short interest, and eventually a big earnings beat.

TSLA tripled in 11 weeks, forming a structure known as a flag pole.  Subsequently, beginning on May 29th, the stock began to base, forming a High Tight Flag.  It built this base for 21 days before breaking out on June 27th.  Such has the difficulty and complexity of the markets been this year, that the breakout occurred on below average volume 9 days before the market uptrend resumed.  To buy it properly meant making an exception to market timing rules.

A solid precedent for TSLA was the QCOM High Tight Flag in late 1999.  While the charts bear several important similarities, especially on daily charts, the key difference is that QCOM’s base happened at the end of a long uptrend.  TSLA’s HTF is a second stage base, which may be more similar to the action of MA in October 2006 or Syntex in 1963.  Both of these Model Book Stocks went on to much larger moves.  Fundamentally, TSLA resembles GM in 1915.  TSLA is also a candidate for a much bigger move, given the incredible demand that remains for this stock, even at current price levels.  I would like to hear your thoughts on TSLA.  What do you think of the stock?  What is a reasonable price target for year-end?

  • 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.

Klein Market Summary-July 8th, 2013

Klein Market Summary

July 8th, 2013

 

Current Market Facts:

Technical Status

 Correction Beginning Week 4

Other Observations

Leading stocks are trending higher, or basing constructively, overall

NASDAQ has gapped up 3 times in recent sessions

Feel of the Market

Markets are finding close support and trading in tight ranges

Important Levels on Key Indices:

Index

Support

Last Close

Resistance

Nasdaq

3400

3479

3488

Nasdaq 100

2951

2963

3000

S&P 500

1600

1632

1654

 DJIA

15000

15136

15340

 

Market Interpretation:

The NASDAQ Composite has risen in 7 out of 8 sessions, including three gaps higher.  This market action has been echoed on the S&P 500 as well.  Recent and new leading stocks are finding support broadly.  While the rally in housing stocks seems to be over for now, and some Biotech leaders have seen extensive Distribution, most other leaders remain under Accumulation.

The market remains a short-term correction, so far.  With the Fed forecasting a gradual reduction of its Quantitative Easing in coming months, the U.S. stock markets seem to remain the prime global destination for capital.  The markets are primed for a Follow-Through Day.

Joel’s Take:

This is not a market to turn your back on – preparation remains key.  With many leading stocks working, it is tempting to consider buying, at this point.  Such a decision must be made with the knowledge that the market direction remains uncertain, and hence the odds of success are reduced.  Still, new positions could make sense, if exposure is limited until headway is made.

Many leading stocks are trending higher, breaking out, or basing tightly: XONE, TSLA, NFLX, LNKD, SPWR, CREE, QIHU, KKD, GNRC, COG, SSYS, JAZZ, V, MA, PCLN, and GOOG.

  • 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.

Klein Market Summary-July 1st, 2013

Klein Market Summary

July 1st, 2013

Current Market Facts:

Technical Status

 Correction Beginning Week 3

Other Observations

Most leaders continue to consolidate soundly

The correction remains well contained so far

Feel of the Market

Fed policy change remains in focus

Important Levels on Key Indices:

Index

Support

Last Close

Resistance

Nasdaq

3300

3403

3500

Nasdaq 100

2863

2910

2927

S&P 500

1560

1606

1623

 DJIA

14551

14909

15000

 

Market Interpretation:

The S&P 500 found support at 1560, last week.  So far, the indices have corrected 6-7%, which is consistent with a short-term correction.  Also, liquid leaders, such as GOOG and PCLN, have consolidated well, so far, and could emerge from proper structures in the near-term.  This leaves the door open for a continuation of the prior uptrend, though it may be equally likely that the correction deepens.

The second quarter saw a continuation of the first quarter’s uptrend, punctuated by 2 corrections.  While the market has risen steadily due to Fed policy, leading stocks have generally seen more choppy action.

Joel’s Take:

Now is the time to review recent trades, and prepare for the next opportunity.  While Fed policy has been inflating the markets, an end to their quantitative easing programs could ultimately benefit our style of investing, as stocks would rise or fall based on natural supply and demand market forces.  Even so, it is possible that quantitative easing could prove to have helped kickstart the economy from the doldrums.

  • 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.