Market Outlook
Strong growth in company earnings has underpinned a bullish
run in stocks that has stretched almost six years. Earnings are still expected
to keep rising, but the pace of growth is slowing, and investors are looking
for signs that sales are up. Equities finished their first weekly gain of the
year after the European Central Bank announced that it would buy 60 billion euros
($67 billion) of government and corporate bonds each month at least through
September 2016. The 1.1 trillion euro program signals the willingness of the
ECB to boost the economies in the 19-nation euro currency alliance. For the
week, the S&P 500 edged up 1.6 percent while he Dow rose 0.9 percent.
As seen in the updated graph below, Gold Mining stocks are
blasting off to start the year and Treasury Bonds continue to move higher as
they have since the beginning of last year. Equity indexes are barely breaking
even and how they end up at the end of January is considered a “barometer” of
how they will end the year.
Investor Analysis
Next week’s performance is considered critical as a
prognosticator of the market’s expected 2015 performance. According to the
Stock Trader’s Almanac January has quite a legendary reputation on Wall Street
as an influx of cash from yearend bonuses and annual allocations typically
propels stocks higher. It is the end of the best three-month span and possesses
a full docket of indicators and seasonalities. The January Barometer
simply states that as the S&P goes in January so goes the year. It came
into effect in 1934 after the Twentieth Amendment moved the date that new
Congresses convene to the first week of January and Presidential inaugurations
to January 20. The long-term record has been stupendous, an 89.1% accuracy
rate (assuming something does not go disastrously wrong between now and
December 31), with only seven major errors in 64 years. Major errors occurred
in the secular bear market years of 1966, 1968, 1982, 2001, 2003, 2009, and
2010. The market’s position on January 31 will give us a good read on the year
to come. When all three of these indicators are in agreement it has been
prudent to heed the call. No other month can match January’s predictive
prowess.
Utilities, Healthcare and Consumer Staples continue to
perform the best out of the 10 S&P Sectors. Financial stocks are the
biggest loser in this group due to dismal fourth-quarter earnings reports
results. Technical indicators are showing signs of the beginning of an uptrend.
Therefore now might be an opportune time to bid on shares on your watch list in
the event there is follow-through on the uptrend.
By Gregory Clay
Investment Strategist
P.S. click on http://www.theoptionplayer.com/ to
sign up for free trade alerts
No comments:
Post a Comment