Archive | August 2013

Klein Market Summary-August 26th, 2013

Klein Market Summary

August 26th, 2013

Current Market Facts:

Technical Status

 Confirmed Rally – Beginning Week 8

Other Observations

Market has stabilized at support levels

Leading stocks are acting very well

The rally seems likely to continue

Feel of the Market

The short-term correction has seen leading stocks move higher, in many cases

Important Levels on Key Indices:

Index

Support

Last Close

Resistance

Nasdaq

3600

3658

3694

Nasdaq 100

3070

3124

3150

S&P 500

1659

1664

1700

 DJIA

15000

15010

15658

Market Interpretation:

Last week, the market seemed like it was on the verge of a correction.  Certainly, there was a pullback underway, especially in the DJIA.  However, the leading NASDAQ indices have been outperforming since the beginning of the third quarter.  While AAPL’s heavy weighting on the NASDAQ indices has helped to limit their downside, it also serves as evidence of institutional accumulation amid this pullback.

Currently, there is a moderate level of Distribution on the markets, but the S&P 500 and NASDAQ Composite have not corrected a significant amount.  In a normal rally, short-term corrections tend to correct 4-7% and last 3-4 weeks.  The June correction was more consistent with the historic norm than the last two weeks.  Current action might be best described as consolidation.  It is possible that the indices could stall and form another leg lower, but that seems less likely at this point with surging leadership.

Global stock and bond markets may be at a cusp where money flows could change based on changing Fed policy.  This could greatly benefit the stock market.  If bond market outflows continue, stocks are the most likely beneficiary.

Joel’s Take:

Perspective is so important in the market.  Investors have just survived a very difficult 13 years in the stock market.  Normally, when we have seen stocks that are up 50% or more during that period, we feel that those are really exceptional leaders.  However, historically, every rally has produced multitudes of stocks that have risen several hundred percent and more.

Yet, any time the market enters a solid rally, or stocks begin to get slightly extended, it feels like they are overdone by comparison to the past decade.  Sound trading rules will keep you in leading stocks for the duration of major moves.  Personally, I try not to trade unless a rule compels me to.  I have found that doing otherwise introduces lower success rates into my trading, and ultimately costs me money.

  • 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-August 19th, 2013

Klein Market Summary

August 19th, 2013

Current Market Facts:

Technical Status

 Confirmed Rally – Beginning Week 7
   

Other Observations

Thursday’s gap down puts the rally and leading stocks under pressure

Distribution levels are very high

Some leaders are showing stress

Feel of the Market

The rally is under pressure
   

 Important Levels on Key Indices:

Index

Support

Last Close

Resistance

Nasdaq

3600

3603

3694

Nasdaq 100

3021

3074

3149

S&P 500

1654

1656

1700

 DJIA

15000

15081

15658

 

Market Interpretation:

The market may be at the beginning of a correction.  With elevated Distribution levels, Thursday’s gap down, and some damage in leadership, any more Distribution at these levels would conclusively put the market into a Correction.  Last week’s action featured the lagging DJIA leading the indices lower, as it plunged through its 50 Day MA on Thursday.  The Dow has lagged during the recent leg up, while the NASDAQ has led.  The Dow was hit hard by CSCO’s and WMT’s earnings reactions, while leader HD gapped down in the handle of its late stage base.

The NASDAQ Composite has shown more resilience than the other indices.  GOOG, which has been trending higher throughout the year, showed cracks this week, as AAPL broke out of a bottoming base with big power.  While AAPL is not necessarily the kind of leader it once was, it continues to exert enormous influence on the market indices.  This has helped to buoy the NASDAQ amidst the broader sell-off.  With the NASDAQ Composite and NASDAQ 100 off a mere 2%, it is difficult to rush out the door with leading stocks, especially when many continue their uptrends.

Joel’s Take:

Major institutional investors, as well as sophisticated individuals, expect Fed QE tapering in the next 6 months or so.  As such, tapering is not a surprise, nor should it be a threat to a rallying market.  Still, after the NASDAQ surged 12% uninterrupted in recent weeks, a 2% pullback is not surprising.

Some leading stocks are showing damaged or broken patterns.  Yet, others are displaying resilience, and even continued uptrends.  Still, if the market continues to trend lower, or market leadership erodes substantially from here, then a more defensive stance would be in order.

There is substantial evidence of resilient leadership, so far.  If the market trends lower this week or shows more Distribution, without signs of support, a more defensive posture might quickly be adopted.

Leading Stock Notes:

The proper analysis of current leadership for signs of topping is critical at this point.  For example, PCLN gapped up on earnings and then pulled back last week, filling its gap.  This action is not necessarily consistent with a top.  Furthermore, the stock is 15 weeks out from a long-term basing pattern.  Most leading stocks run a year or more from such a breakout.  BBRY ran similarly from its breakout in 2006 until it topped in late 2007.  Even so, PCLN’s action could develop into a base.

The action of CREE last week was quite disconcerting to me, as it gapped down and corrected 26% in 2 days.  CREE has been one of the best liquid leaders this year, up 124% before it cratered last week.  Other green energy plays showed weakness as well, CSIQ, SPWR, and SCTY.  TSLA pulled back hard ahead of the market weakness, but interestingly held steady amidst Thursday’s market plummet.  A few leaders seem to be constructing sound bases, which could add new fuel to market leadership.

  • 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-August 12th, 2013

Klein Market Summary

August 12th, 2013

Current Market Facts:

Technical Status

 Confirmed Rally – Beginning Week 6

Other Observations

Market has paused again as leaders surge

Distribution levels are rising

Earnings have continued to drive leaders higher

Feel of the Market

Fed tapering fears are back in focus

Important Levels on Key Indices:

Index

Support

Last Close

Resistance

Nasdaq

3625

3660

3694

Nasdaq 100

3091

3119

3144

S&P 500

1687

1961

1700

 DJIA

15265

15426

15658

Market Interpretation:

The indices stalled at rally highs on Monday, but only corrected less than 2% overall.  While Distribution has increased somewhat, it is not yet a threat to the rally.  Furthermore, the action of leaders continues to suggest a continued rally.  If the markets correct more deeply with a pick up in Distribution, then the indices would need to be closely evaluated for a possible change of trend.  However, at present there are no signs that the rally is in danger.

Leading stocks often take a year or two to complete major moves.  So stocks like NFLX, TSLA, and LNKD might suggest that we are in the midst of a major move for the broader market.

Joel’s Take:

Because the method that we use to invest requires both qualitative and quantitative analyses, market interpretation is inherently colored by our own individual biases.  For example, even in a strong rally, it can be difficult to be Bullish if you are not profiting in the markets.  One solution is to find out if those around you are profiting, or to determine if you could have been profiting if you made one or two key decisions differently.

Since the middle of 2011, I have seen that the markets have increasingly responded to the Fed’s quantitative easing, and have floundered when those programs ceased.  While these programs do not directly target the stock market, higher stock markets are an expected outcome of these easing programs.

I have been of the opinion that since 2009, the Fed’s primary objective has been to prevent real estate deflation at all costs.  Using Japanese deflation in the 1990’s as an example, the Fed has no effective tools to control deflation, once it begins.  So by causing inflation to combat the over supply in housing, the Fed is aware that they will inflate many other asset classes, especially commodities and stocks.

We haven’t seen inflation run rampant, despite the enormous increase in liquidity, because large U.S. banks are not redeploying capital.  Even so, looking inside CPI data does reveal a few strong inflationary undercurrents.  Moreover, if and when banks do begin to deploy their reserves in the form of loans, inflation might be expected to expand at a rate that could be difficult for the Fed to control.  Even so, the Federal Reserve has powerful tools to reduce inflation, as seen at the end of 1970’s.

Earnings notes:

The past few weeks have seen top-shelf leaders respond positively to earnings.  Additionally, IPO’s in the past month have had amazing moves, in many cases.  Many of these stocks could set up in coming months.  Other stocks are poised to emerge from proper bases.

  • 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-August 5th, 2013

Klein Market Summary

August 5th, 2013

Current Market Facts:

Technical Status

 Confirmed Rally – Beginning Week 5

Other Observations

Robust accumulation persists

Indices are trending solidly into new high ground

Earnings-driven breakouts are in full force

Feel of the Market

The focus remains on earnings results

Important Levels on Key Indices:

Index

Support

Last Close

Resistance

Nasdaq

3625

3690

3700

Nasdaq 100

3091

3144

3200

S&P 500

1700

1710

1750

 DJIA

15600

15658

16000

 

Market Interpretation:

The NASDAQ indices led the market higher Thursday and Friday.  The breadth of uptrending stocks has expanded continuously since the rally resumed.  Also, the mix of stocks has become much more growth oriented, than in the first quarter of this year, which included many liquid stocks with laggard fundamentals.

The resistance levels mentioned in the above table are all psychological numbers.  Because the indices are in new high ground, or at least decade highs for the NASDAQ, there are no technical resistance levels based on previous price action.

Leading stocks, groups, and the major indices are confirming that the market remains under powerful, consistent accumulation.  This rally seems to be  exhibiting more demand than most of the rallies in recent memory.  This level of market strength seems quite remarkable, given the mediocre level of economic growth.   The market continues to react to Fed policy which is predicated on a not too strong, not too weak economic scenario.

Joel’s Take:

The uptrend persists, in earnest, with expanding leadership.  Earnings reports will continue to offer additional opportunities in the coming week.  As some leading stocks are just breaking out and others seem to levitate, it is important to remain disciplined.  It is critical to remain aware of your market exposure, and to maintain relatively low cost bases.

The market is probably entering a phase of the cycle where the rally has become obvious to institutional investors.  When outcomes seem obvious in the market, there can be more shakeouts, pullbacks, and pivot point undercuts.  However, we might still expect the uptrend to remain robust.  So far, Accumulation has driven the markets higher, and Distribution has only caused the rally to briefly pause.  This market remains ripe with opportunity.

  • 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.