Markets Move from ‘Fear’ to ‘Greed’

Nicholas Vardy

Nicholas Vardy has a unique background that has proven his knack for making money in different markets around the world.

It was another strong week for stock markets, with Dow Jones up 1.69%, the S&P 500 gaining 1.85% and the NASDAQ rising 1.72%. The MCSI Emerging Markets Index also eked out a gain of 0.81%.

Big gainers in your portfolio included Google (GOOGL), which jumped 5.19%; the iShares MSCI Philippines (EPHE), which added 4.99%; and Apple Inc. (AAPL), which rose 3.51%.

Several positions moved back above their 50-day moving averages and are back to a BUY. These include Google (GOOGL), the WisdomTree Japan Hedged Equity ETF (DXJ), KraneShares CSI China Internet ETF (KWEB), iShares Currency Hedged MSCI Germany (HEWG) and Costco Wholesale Corporation (COST).

What a difference a month makes.

On Feb. 12, market sentiment was in extreme fear mode. Today, it has tipped into greed.

fear and greed

Not only that, but it seems that everything has rallied — and rallied hard. Over the past 50 days, there have been meaningful rallies in everything from stocks and high-yield bonds to industrial metals like platinum, gold and the Japanese yen. Every one of these markets is up at least 2.5% over the past 50 days.

Market breadth also has been impressive, giving a long-term buy signal. Since 1940, there have been 13 other times that the Index has undergone such an extreme move within a two-month period. And since the S&P 500 stock launched in 1957, the index has showed a one-year return above 16% every year except for 1973.

The market’s action also confirms the contrarian power of the negative sentiment indicators that I have been citing since the start of the year. When market sentiment gets as extreme as it did early this year, the likelihood of a strong bounce like the one we’re seeing right now is very high.

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Portfolio Update

Berkshire Hathaway (BRK-B) gained 1.89% over the last five trading days. Coal production volume is expected to decline through 2016, putting a drag on Berkshire Hathaway’s Burlington Northern Santa Fe rail line, as well as others. However, fuel prices have been extraordinarily low through 2016 so far — down 30% year over year. This, coupled with a special rail customer surcharge, should have a positive impact on earnings. BRK-B is a BUY.

Google (GOOGL) jumped 5.19%. Closing the week as the strongest performer in your portfolio, GOOGL also pushed above its 50-day moving average (MA). Donald Trump has been railing against corporate inversions, and wants trillions in overseas corporate funds repatriated to the United States. European lawmakers also are hounding large corporations like Google and Apple for using complex, but legal, tax structures to move funds out of Europe — and they want a bigger cut. GOOGL moved to a BUY.

WisdomTree Japan Hedged Equity ETF (DXJ) gained 1.36%. The Bank of Japan (BOJ) recently announced it would maintain its plan to inject 80 trillion yen ($705 billion) annually into its economy. The BOJ also left its key interest rate at 0.1%, deciding not to dip its toe into the waters of negative interest rates (just yet). DXJ rose above the 50-day MA to become a BUY.

The Walt Disney Company (DIS) rose 0.43% last week. The incredible success of Disney’s latest new Star Wars movie has inspired Disney to resurrect another of the world’s most iconic movie franchises. Disney recently announced that they will bring Steven Spielberg and Harrison Ford together once again and make a new Indiana Jones film, expected to debut in July 2019. DIS is a BUY.

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PayPal Holdings (PYPL) gained 2.91%. Deutsche Bank has designated PayPal as one of two electronic payment firms that are “the clear leaders in the move to mobile payments.” In other news, Pacific Crest raised its PYPL price target last week from $39 to $42. PYPL is a BUY.

iShares MSCI Philippines (EPHE) added 4.99% over the past five days of trading. EPHE has been notching consistent gains since hitting a 52-week low in late January. Fast-forward to today, and EPHE is now trading along its mighty 200-day MA — a line it breached late last week. EPHE has not been near its 200-day MA since mid-2015, and if this Asian exchange-traded fund (ETF) holds this line, expect the rise to continue. EPHE is a BUY.

PureFunds ISE Cyber Security ETF (HACK) traded flat last week. HACK was recently recognized as the “Best ETF Innovative Product of the Year,” the “Best ETF Specialist” and “ETF Newcomer of the Year” at the inaugural Fund Action ETF Performance Awards. HACK is a BUY.

Chipotle Mexican Grill, Inc. (CMG) traded flat since being added to your portfolio last week. Chipotle enjoyed its initial post-IPO meteoric rise simply because folks loved the food. With CMG’s troubles likely behind them and the company’s food still remaining very tasty, I expect CMG to bounce back in a big way. CMG is a BUY.

Nicholas Vardy

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