Market Wrap - week ending 5/9/2014

Yet again … Not much has changed our cautious outlook since last week’s alert.  The Nasdaq and Small Cap Russell 2000 spent the week in a decline losing roughly 1.5% for the week, while the S&P500 and Dow went basically sideways with no gain.

We continue to have a very unique situation in the market where the smaller more growth-oriented stocks are feeling the effects of a correction down roughly 10% for the year, while the larger companies have basically not declined at all and are sitting close to multi-year highs.

Most of the action now is in defensive stocks and the energy sector, which are not the type of stocks that generally lead a sustained rally. The fact that quality growth stocks are doing badly says a lot. Companies like Twitter, AOL, Groupon, Zullily, FireEye, Whole Foods are all down more than 20% in the last two days from missing their earnings expectation, where normally the impact from an earnings miss would be less severe.

Many full-time investors are starting to compare this bifurcated market to what we saw in 2007.  Although I personally can’t imagine that we will have another 2008 in the near future; larger corrections certainly do start this way … with growth oriented stocks going into a decline months before the larger stocks even show a hint of a decline.  Small corrections generally happen quicker … they don’t take as long to setup, and the market generally moves more in step with all companies equally taking a hit at the same time.  Whereas larger corrections usually take longer to start since the large institutional investors are slowly moving their money from riskier smaller companies to larger safer ones.  This process can take months to complete.

Bottom line, for now … watching from the sidelines is the most prudent behavior.  As you already know, all of our strategies moved fully to cash over a month 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 5/2/2014

Again … 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, albeit better than last week.  Although the market has stabilized and in fact recovered nicely so far from the decline of the past 6 weeks, we still have leading stocks severely underperforming.

In fact, the greatest gains over the past few weeks have been in income and blue chip stocks; recent breakouts include Procter&Gamble, 3M, Exxon Mobil, Wal-Mart Stores and tobacco firm Lorillard.  All incredibly strong companies, but certainly not leading stocks from a growth perspective.  Clearly, investors are still being risk averse, looking for safety over growth.

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. 

As I mentioned last week, 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 might 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 4/25/2014

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

Market Wrap - week ending 3/28/2014

This week was a bit nasty, with the leading and smaller cap stocks (Nasdaq and IWM) taking heavy losses continuing the month long decline that started in early March.  Larger (safer) stocks are doing much better although most are still not profitable, just staying flat for the same time period. 

This rotation to larger companies is fairly normal when declines occur or when fear that a larger decline is mounting, because the large players move their money from riskier positions to more defensive positions.  This week as an example, we saw the BioTech companies get hammered while utility and telecom companies did quite well.

I have commented on this defensive rotation in the past.  Many times it is a precursor to an impending larger drop in the near future.  Mutual funds and most hedge funds are unable to move their assets out of the market even if they wanted to.  They are literally forced to stay invested by their charter, which means that their investors are unfortunately not protected during large drops in the market.  So, to minimize the negative impact, they try to find safer alternatives in the market or high dividend paying investments that tend to weather corrections better.  These ‘safer investments’ still drop when markets correct, but their declines are usually less extreme or the dividends paid help offset the capital loss that occurs.  I actually spent some time on this interesting phenomenon in my upcoming book, entitled “Buy and Hold Hope” due out in just a few months.

You probably have noticed our accounts over the past two weeks have been slowly lowering their exposure in the market, moving more and more assets into cash.  Both “the One” and our medium term strategy have exited completely, with the longer term strategy still invested fully.  I always find it interesting when the different strategies start moving in step, verifying in a sense the need to be cautious right now.

It is interesting to note that the S&P has experienced very little loss from the high made earlier this month, in fact it is less than 1% off the top, yet the Nasdaq has fallen over 5%.  All of the indexes have basically made no money year to date.  With the Dow, Nasdaq and Russell 2000 in negative territory and the NYSE and S&P500 barely putting in a profit (less than 0.5%).  In fact most stocks have made little money since before thanksgiving last year, moving sideways instead.  This sideways movement (or consolidation) isn’t abnormal after such a strong rise in 2013 and in fact is healthy.  Granted, if money doesn’t start moving in to the market soon, it can imply a larger decline is coming.  So far, things are holding up and the current decline is mooted.

Regardless of the outcome, we will continue to monitor and protect your accounts.  Hope you have a wonderful and safe weekend.

Respectfully,

Randall Mauro

Resnn Investments, LLC

http://resnnInvestments.com

Market Wrap - week ending 3/21/2014

A fairly dull week in the market although today certainly was a little nasty with the market making a downside reversal.  We started the day flirting with new highs (on the S&P only) and then ended closing at the absolute lows of the day, with the Nasdaq and Leaders being hit particularly hard.  From the start of the year most stocks have made very little if any upward movement.  We are in a consolidation (sideways movement), which can be healthy for a longer term move, if we can regain a leading position.

For now we wait and see if the markets can keep acting well.  We lightened our margin position in our ‘the One’ strategy slightly, although we are still on margin.  The other strategies still are fully invested.

Not much new to discuss in the market this week … we are just in a holding pattern waiting for the market to make a decision as to which way it wants to go.

Hope you have a wonderful and safe weekend.

Respectfully,

Randall Mauro

Resnn Investments, LLC

http://resnnInvestments.com

Market Wrap - week ending 3/14/2014

We find ourselves again in a declining market with the Dow, NYSE and S&P500 all in negative territory for the year (again) and IWM and QQQ (small caps and technology focused ETFs) not far above the breakeven point.

For our ‘the One’ strategy, we started the week at 100% (no margin use) and lowered our exposure mid week to 75% invested.  The market is starting to look weak again, although I think we are very close to another bounce up from here.  We have dropped a bit too much in the past week to not get some rally attempt.

Our longer term strategies are still both fully invested and are waiting for more signs of weakness in order to warrant an exit.  With a bounce (up) overdue, I would assume we will not get to this exit point in the coming week.

The market is definitely looking a bit more shaky than it did over the previous three weeks.  Down days having significantly higher volume than up days, and the down days have larger price movement ~ fear is creeping in.  More importantly, I am starting to see many individual stocks breaking apart, particularly the previous leaders.  As I have mentioned in the past, leaders ‘lead’, so if they are falling apart … it isn’t too much of a stretch that that rest of the market will follow.

Volatility remains inflated which drives the fear card, mostly driven by news events including China’s production numbers and the Ukraine situation.  And as I mentioned last week, market sentiment is still overly bullish, which as ‘secondary indicator’ is not reliable enough to use as a trading signal, but should serve as a warning sign of a potential problem down the road.

I expect to have a resolution in the coming week, whether we reverse and move back to new highs OR continue the downward slide … as we are close to the level where a bounce should occur, and if it doesn’t then I expect to see further downside quickly.  Of course, whichever way the market direction goes, we will focused on protecting your investments.

Hope you have a wonderful and safe weekend.

Respectfully,

Randall Mauro

Resnn Investments, LLC

http://resnnInvestments.com

Market Wrap - week ending 3/07/2014

Another productive week for the market.  As you see above, we exited margin and went back to just 100% invested.  For those of you that have do not have margin accounts, there was no change in your allocation; you were fully invested at the start of the week and you are fully invested at the end. 

As you have heard me say before, margin use should only be used in opportune times when the market indicators are all aligning nicely.  Since being on margin increases the risk on your account substantially, we only want to use it sparingly.  So … with the increased volatility that we have seen this week mostly as a result of the Ukraine situation, I feel it is best to remain off margin for the near term.  We are still fully invested (100%), and I still feel the market is acting very healthy, just took some of the risk off the table.  Protecting your account from decline will always be our number one goal, paramount to generating profit.

Looking at the previous week, the market had a huge decline on Monday from the Ukraine uncertainty then bounced back on Tuesday completely erasing all the previous days’ losses.  Our analysis did not show dramatic selling pressure on Monday and so we did not feel any change was necessary in our accounts.  As the week has progressed we have seen an increase in selling although nothing that causes too much concern at this point.

The market continues to act fairly well with the only concern cropping up being that investors are starting to get complacent again.  Although we do not use market sentiment in our analysis, it is just something to note that when there is too much bullish conviction in the market it can lead to a pullback.  Market sentiment is a ‘secondary indicator’ which basically means that it isn’t reliable enough to use as a trading signal, but that it a warning sign of a potential problem down the road.

Hope you have a wonderful and safe weekend.

Respectfully,

Randall Mauro

Resnn Investments, LLC

http://resnnInvestments.com