Monday - August 7, 2017
The Current Market
None of the indices finished the week in negative territory for the year
The indices finished the week mixed to higher with the DOW 30 turning in the best performance by closing up 1.20% followed by the Utilities, up 1.08%. None of the other indices were able to close over 1%. Not very deep in the bullish camp and with the RUT falling -1.19% we end up with more of a bearish ending.
Are the markets getting tired? I doubt it, but other factors such as North Korea could cause investor fear to heat up and this alone would bring the markets down, and once the ball is rolling it will be hard to stop it.
This is not a market to be buying in. That market was about a year to 18 months ago. This market is one for caution and the one thing we do not want to be is in the camp that waits too loooong to move out.
Yes, Consumer confidence is the driver and is still in control, but this could change if people feel there will not be a new tax structure, or no fix for the Obama don't care, or a war with NOKO, although a war will not be as bad as the Republicans doing nothing for much longer.
This is a hard market to figure since the new highs on the DOW 30 are because of Apple & Boeing, while the other 28 do little. Yes, many stocks in the DOW 30 have reached new highs but that was several weeks back. Only a handful have reached a new high recently and they are the same ones over and over. Not good for the bull.
I hate to sound to gloom & doom but it is very hard to find a stock worth picking up in this market. Even the ones climbing are doing so a little bit at a time and this increases the risk/reward factor. Not enough reward for the risk.
The best bet is still to enter the markets with a bargain or a small stock. Either one will limit the downside, assuming we have done are homework and picked a strong bargain or small stock.
Big money can be made on small start up companies, but since most are scams we have to be very careful. Look for small companies trading over a quarter ($0.25) with fewer shares outstanding and decent volume. These 3 items would be a good start.
I am currently recommending Powin Energy, last trade $2.50, off from $2.25 last week, as a place to be. This is a stock with basically no sellers meaning its the one we want to own. Click here to read my recommendation on Powin Energy.
AMD’s new GPUs are going head to head with rival Nvidia Corporation’s (NASDAQ:NVDA) and winning in price and performance. Meanwhile, AMD is stealing market share from semiconductor giant Intel Corporation (NASDAQ:INTC) on multiple fronts, with Epyc outperforming Intel Broadwell server chips and Ryzen is grabbing market share from Intel’s Core PC lineup.
We want to buy AMD on pullbacks but a big correction will bring the stock down quickly. Still, the longer term is looking good.
Looking at precious metals, after watching gold having trouble climbing, with a total move of -$33.40 in June, due mostly to a stronger dollar and the recent increasing of interest rates, the bombing in Syria and a possibility of going to war with North Korea, we might want to watch the metals a bit closer. One thing about the metals would be they have been trading near the low end of the trading range and haven't been able to get over $1300 since September of 2016.
Gold closed out the week at $1,264.30, off -$4.70 on the week and off -$4.70 for August. The $1250 level for gold is a strong support/resistance level and closing over that level could mean higher ground ahead. Gold traded back over the $1200 level for 27 weeks after staying under it for 1 week. Gold was off -$123.60 for 2015 and up +$91.50 for 2016.
Oil closed out the week at $49.52, off -$0.27 and off -$4.70 for August. Oil was up +$91.50 in July. Oil started climbing recently because of the decision by Russia and Saudi Arabia to curtailed production and had closed over $50 for 14 weeks, but recent news tells us the stockpiles are quite large, which in turn will make it hard for OPEC to have much control over pricing.
Avoid oil companies as supply is great, oil stocks are overpriced and there are few signs that higher oil should stay with us that long. Oil has a support level at $35 and I believe there is a strong possibility we will see it.
The bottom line is, backed into a corner, once the markets do decide to correct there will be no way of knowing how far down. A much bigger downward move than 10% to 20% will be needed.
Markets do not
go up forever and my SPREAD has been telling us the big OTC stocks have gotten so far ahead of the listed
stocks the correction will have to be a decent one.
from the 52 week low.
The table above shows 0 indices with less than 10% away from the 52 week low compared to 0 the previous week.
off from the 52 week high vs the week before
Since the SPREAD is a leading index that has recently been reaching new all-time highs, and should be cause for concern. It's always bullish to see a new 52-week/all-time high, but what it really is telling us is the markets are very overvalued.When the VL falls faster in this index, it is a giant cautious sign for the near term markets as it is a sign of an overbought market that is ready to turn down. Please keep in mind the SPREAD is a broad market and teaches us much.
The indices finished the week mostly higher but the bad news on the week was the Russell 2000 & SPREAD lost over 1% on the week. This is a negative because both lean heavily toward the OTC market and it is my belief that the markets cannot rally without the big OTC stocks. On the other hand, the Dow 30 continue to set new highs but it's doing so I'm just a small basket of stock and again this is more bearish than bullish. Now if we add going to war with North Korea the markets are starting to look more like a correction is in the works. I do know the markets are oversold and I do know that it's impossible to predict a correction but I feel like we should take a safer stance and possibly lighten up on profitable positions. We may even want to wait to buy the bargain but this is an ideal time to look at the small stock because they tend to move on their own no matter what the world economy does. Find one with a good story and not not too many shares buy it. If we want to get into this market we have to look for bargains in the small caps and special situations in the low-priced arena.
but what investors "believe" is going to happen!
The concept does work, but the problem is finding the best and the correct stock to move into. Look for a stock with a great story, because with small stocks the story is what makes the difference.
Continue to look for stocks near the lower end of the trading range with strong daily volume, and growing revenue, for the best bargains. Avoid stocks that seldom have news and have stayed down too long.
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"If in the right stock, at the right price,
the market direction will mean little!"
I'm J.R. Budke and this is my opinion!
J.R. Budke was a stock broker from 1981 to 2000, an options principle since 1982 and a branch office manager since 1987. JR became inactive as a stockbroker on 12/31/99. J.R. writes most of the articles and opinions for the Stocks in the Spotlight. The stories and stocks found on this site, or any "Stocks in the Spotlight" written material, are the opinions of J.R. Budke, unless other wise stated, and should not be considered as advice. You should not purchase any stocks solely on the opinions found on the "Stocks in the Spotlight's" web site or in any of its written material. You should also be aware that options are not for everybody and carry a high degree of risk.
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