Market Wrap - week ending 4/25/2014

This report will be a short one, since not much has changed our outlook since last week’s alert.

We started the week with decent gains on Monday and Tuesday only to spend the next three days giving back all the gains and then some.  We have a clear bifurcated market where the largest losses are again in the riskier smaller cap stocks and safer sectors like tobacco and utilities are doing well.

The Russell 2000 lost 1.2% for the week, while the Dow only lost 0.3%.  Depending on where you are invested, you probably have a very different outlook, with the Russell 2000 and Nasdaq down over 7% from the high made in early march, while the Dow and S&P 500 are only down 2%.

Although the pain has been minimized in the larger stocks, this ‘split’ market isn’t a great sign for the longer term outlook. Each time the Nasdaq takes a hit like it did today (down 1.7% for the day), it chips away at the confidence of the bulls which over time can cause them to be more cautious keeping their money on the sidelines.  Eventually with this lack of demand, will have a wide spread effect … OR hopefully enough time will go by that institutional investors will decide to start investing again which will allow the market to move up.

As I have said for a few weeks now, with the current uncertainty in the market and lack of demand, the best place to be is on the sidelines, protected.  Until the Nasdaq and smaller-caps take part in the recovery, we quite possibly have more downside to experience.

Hope you have a wonderful and safe weekend.

Respectfully,

Randall Mauro

Resnn Investments, LLC

http://resnnInvestments.com

Market Wrap - week ending 4/18/2014

Not much has changed our outlook since last week’s alert.  Although the week was constructive and positive from a performance point of view, the longer term outlook still looks questionable.  Although in the short-term there are buying opportunities, the market still looks broken.

Leading stocks have broken down and continue to underperform the larger, more stable stocks.  They need more time to warrant an investment.  The larger, safer stocks are acting well, mostly moving sideways instead of declining in value, showing a clear ‘flight to safety’ approach by the institutional investors.  

The smaller cap, more risky stocks topped in early march and have been declining ever since, with the Nasdaq down roughly 10% from the top nearly 2 months ago.  Leaders are supposed to lead, and the current risk-averse nature will not propel the market to new highs over the long run until this occurs. 

Looking over history, there has never been a time where the market has moved on to new sustainable highs without the smaller caps leading the way.  We could get to new high ground, but in order for it to hold … to be sustainable, we need to see these riskier leading stocks acting well and leading again.  Bottom line, the large investors need to be interested in investing in the entire market, not just in the safe companies for a long term rise to occur. For now, this is just not happening, so a defensive posture still makes sense.

Typically mild corrections last no more than six weeks, so we technically could be at the bottom now, and will shortly head back up, but the jury is still out for now … until we see a decent inflow of funds, I see no conclusive evidence that the worst is behind us.

As you already know, all of our strategies moved fully to cash a few weeks ago, so we have nothing to worry about if the market continues down.  We will continue to monitor the situation very closely and if things improve we’ll quickly be back in the market.

Hope you have a wonderful and safe weekend.

Respectfully,

Randall Mauro

Resnn Investments, LLC

http://resnnInvestments.com

Market Wrap - week ending 4/11/2014

Another nasty week in the market with unfortunately no end in sight.  Yesterday and today the three indexes that were holding up the strongest (Dow Jones 30, S&P500, and the NYSE) all broke down and made new lows.  In fact, what a difference only one week made … last Friday the S&P 500 made an all-time high intraday, then collapsed 4.3% over the past 5 trading days. 

Whereas the above indexes didn’t look as weak until this week, the Nasdaq has been struggling for awhile now.  Yesterday it fell over 3% making it the worst 1-day price drop in 2 years.  The Nasdaq topped roughly a month ago and has dropped 8.5% since then, the same with the small cap Russell 2000.  Leading stocks and the smaller riskier stocks have shown stress for most of March, which is normal in a market topping pattern, where the larger institutional investors move their money from riskier positions into larger, ‘safer’ positions.  So, for now we have a very ‘normal’ topping pattern playing out.

Most corrections are contained within an 8% drop from the previous high, and then the market stabilizes and moves higher, and yet the Nasdaq has fallen over that level in the past month … which can imply that we have more downside to go.  Intermediate term corrections are usually contained between 8% and 12%, so we either need to immediately move higher starting Monday OR one can expect us to drop another 4% before testing support.  I expected a bounce around the Nasdaq 4000.00 level and we closed right at that level today, so we likely see a bounce from here early next week.  We certainly are overdue for a bump up, but how strong that bounce will be, will tell us a lot about the next few months in the market.

Right now, the only place to be … is on the sidelines, NOT invested in the market, taking a protective stance, which is where we will remain in the short-term.  As you already know, all of our strategies moved fully to cash a few weeks ago, so we have nothing to worry about if the market continues down.  We will continue to monitor the situation very closely and if things improve will quickly be back in the market, but for now we remain in the safety of cash.

Hope you have a wonderful and safe weekend.

Respectfully,

Randall Mauro

Resnn Investments, LLC

http://resnnInvestments.com

Market Wrap - week ending 4/4/2014

This week was a bit nasty, we saw a traditional fake-out which caught many investors by surprise.  In fact, even the daily investment newspaper Investors’ Business Daily, which is usually pretty good at getting a gauge of the market, on Tuesday changed their Market Outlook from ‘Uptrend Under Pressure’ to ‘Confirmed Uptrend’, only to reverse their decision today to ‘Market in Correction’.

It was a wild week for sure. From Monday to Wednesday the Nasdaq rose almost 3% (in three days), then yesterday and today it sold off hard … losing over 3.5% (in only two days).  The small cap Russell 2000 did exactly the same thing, gaining 3.6% in the first three days and losing it all yesterday and today.  Leading stocks and technology oriented stocks have been hammered over the past two days.  This certainly is not what you want to see in a healthy market. 

The NYSE, S&P500 and Dow Jones have been holding up better than the others, with all of them making a very small profit for the week, BUT these indexes have done quite poorly since the start of the year.  This serves as continued confirmation from my previous comments over the past few weeks that a defensive rotation was occurring with large institutional investors clearly moving their funds away from riskier small caps into larger (safer) companies.

All indexes have been struggling since the start of the year, with the S&P 500 the only one that is eking out a small gain year to date.

Are we in for a larger decline?  Larger market declines take time to start … usually a few months of iffy action before the market finally tops and breaks to the downside.  We could be going through this ‘starting’ phase right now, but it is a bit too early to tell.

I certainly don’t like this bifurcated market, where the leaders are lagging and the defensively oriented sectors outperforming, but we are at a place on the charts where I expect value-oriented investors to jump in which should buoy the market in the short term. 

We are sitting at the exact levels that previously acted as support, and although it might be obvious to most traders … I expect another bounce as a result.  Over the past year, anytime the market got to this level … we usually were at the bottom and a new up-move began, but time will tell if the pattern from last year continues here.

One very unexpected situation in today’s market that is unlike the previous declines over the past year.  The VIX has been quite tame over the past week, which is odd for sure.  We do not use the VIX in our trading decisions, but I do monitor it for my own confirmation since it is so widely watched in the market.  I have discussed the VIX in the past, it is considered a good way to measure the sentiment of the market players and a good gauge of fear in the market.  With little movement during the current decline, it would imply that investors are NOT concerned, which indicates complacency.  Is this good or bad, time will tell??

Resnn has been in cash most of the week.  Our ‘One’ and ‘Medium’ term strategies began the week fully in cash, and stayed out of the market all week.  Our longer term strategy finally had its’ sell signal on Monday, so we moved that strategy fully to cash on Monday afternoon as well.  With all of three of our strategies exiting the market, it is no surprise that we had such a decline over the past two days.  This confluence of signals is a bit alarming for sure.

For now, we sit on the sidelines in the safety of cash.

Hope you have a wonderful and safe weekend.

Respectfully,

Randall Mauro

Resnn Investments, LLC

http://resnnInvestments.com