With all eyes trained on the budget-ceiling drama in Washington, the S&P 500 closed down 3.9% last week, enduring its worst five-day run in a year. U.S. markets have now fallen three months in a row. That’s a streak not seen since 2008 at the height of the financial crisis. Meanwhile, gold hit another record high as investors sought safe-haven assets and the U.S. dollar was hammered, falling to an all-time low against the Swiss franc.
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The bulk of your Bull Market Alert portfolio performed in line with the market, with two notable exceptions.
First, your position in Bank of Ireland (IRE) soared 24.14% last week, on news that U.S. billionaire Wilbur Ross invested 300 million euros in the bank, alongside Canadian firm Fairfax Financial and California’s Capital Group in a deal worth a total of €1.1 billion ($1.6 billion).
A noted contrarian investor, Ross said that his investment was motivated by positive news that the Irish economy had turned the corner. Indeed, the news from the Emerald Isle has been good. The government announced last week that it was ahead of target to bring its budget deficit under control. And the week before last, the European Union eased the terms of an €85 billion international bail out. If you can take the volatility, add to your position in Bank of Ireland (IRE) here. But hold on for a volatile, volatile ride.
Second, your holding in CROCS Inc. (CROX) shot up 10.94% on news that the company sold 14 million pairs of its colorful resin clogs and sandals last quarter, leading to both record sales and earnings. Based on the closing bid price of $9.80 on Friday, your December $22.00 options are up 127%. Since volatility is such a big part of an options value, sell your remaining options on Crocs here to lock in your 12th triple-digit percentage gain of 2011. Hold onto the stock for now, which is up 31.58% since I recommended it in June 20. Raise your stop to $28.25 to protect your profits.
Three of your current Bull Market Alert positions — Hansen Natural Corporation (HANS), Toyota Motor Corp. (TM) and Novo Nordisk A/S (NVO) are announcing earnings this week.
Otherwise, the markets are as uncertain as they have been in the last two years. Even if the U.S. Congress passes the debt-ceiling compromise, it may not solve the market’s problems.
On the one hand, it could open the door to a short-term relief rally, which could send the market soaring by 4%-5% this week, testing its previous resistance level of 1,350 on the S&P 500. With the market selling off for five consecutive days, it is due for just such a relief rally.
On the other, the market could judge the whole Washington dog-and-pony show as kicking the can down the road, and one that will not prevent the ultimate downgrade of U.S. debt from its much-vaunted AAA status.
What is certain is that stocks are acting in a wild manner. Overall, patience and defensive holdings are the best combination for these uncertain times right now. And if sentiment does improve, your current Bull Market Alert portfolio is well-positioned to profit.
Portfolio Update
Proshares Ultra Silver ETF (AGQ) ended the week 1.19% lower. AGQ has speent the past two weeks in a trading range. With many analysts calling for $1,700 gold in 2011, this bet on "poor man’s gold" remains a BUY.
Alliance Resource Partners L.P. (ARLP) dropped 3.32% this past week. ARLP’s recent earnings report included a rise in revenue and positive progress integrating a recent large corporate acquisition. Maintaining support above its 50-day and 100-day moving averages, ARLP is a BUY.
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Avago Technologies (AVGO) fell 9.28%. Although down since being added to our Bull Market portfolio, AVGO has come to rest on its 100-day moving average once again. This is significant because AVGO has rallied four times since March, and each rally occurred after touching the 100-day moving average. I expect AVGO to rise as it reports Q3 results on Aug. 23, and to close in on its $45 target price. Dropping below its 50-day moving average, AVGO is now a HOLD.
CROCS Inc. (CROX) rocketed 10.94% this past week. CROX announced earnings on July 27 and reported excellent numbers. The stock took a significant overnight jump, hitting a fresh 52-week high. Take your profits on your remaining options here, and raise your stop to $28.25 to protect your gains. Trading well above its 50-day moving average, CROX remains a BUY.
Hansen Natural Corporation (HANS) pulled back 4.83% over the previous five trading days. HANS will report earnings on Aug. 4. Coming to rest on its 50-day moving average, this chart is still perfectly positioned for an upward move. HANS remains a BUY.
Bank of Ireland (IRE) made a staggering 24.14% gain last week. IRE is now poised to double in price since hitting its 52-week low just two weeks ago. This is the kind of “option-like” behavior that you can expect from your current positions in European banks. Hold on to your horses. IRE is now a BUY.
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National Bank of Greece SA (NBG) lost 11.49% this past week. Standard & Poor’s announced it may lower Greek bank ratings if funding sources dip enough to cause bank deposits flowing out of Greek banks to exceed their available collateral. Dipping just under its 50-day moving average, NBG is now a HOLD.
Novo Nordisk A/S (NVO) ended the week 2.95% lower. NVO has been moving lower on news that a U.S. law firm has filed a class action lawsuit against the company, in connection with “alleged wage and hour overtime violations”. NVO reports earnings on Aug. 5. NVO moved below its 50-day moving average last Wednesday and is now a HOLD.
Rayonier Inc. (RYN) dropped 3.40% this past week. Rayonier reported third quarter earnings on July 28. Although the company met expectations and its forecast is positive, RYN’s stock price has slipped since the report. RYN has moved to a HOLD based on its 50-day moving average.
Toyota Motor Corp. (TM) fell 3.63%. The company’s stock price touched the 200-day moving average last Friday. Significant rallies have happened twice since April 15 from this exact chart level. Toyota will report earnings on Aug. 2. This report may just be the catalyst we are looking for. Dipping right under its 50-day moving average, Toyota is now a HOLD.
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