The major U.S. stock indexes closed another week of gains with the Dow Jones rising 1.94% and the S&P 500 Index up 2.64%. The MSCI Emerging Markets Index ended the week 3.69% higher.
All eyes on Wall Street remain focused on the major resistance levels the Dow Jones and S&P 500 last visited in July 2011. On Jan. 9, I suggested in my
Bull Market Alert trading service that 1,345 would be the next stop for the S&P 500 — and it broke that level on Tuesday. All eyes are now on this major resistance level to see whether the market can continue its march upward.
Your Alpha Investor Letter positions had a positive week, with all but one of your positions posting significant gains. Visa Inc. (V) was the big winner, posting a hefty gain of 6.30%, and the Market Vectors Russia ETF (RSX) took a close second by sporting a 5.72% rise. Freeport McMoRan Copper & Gold Inc. (FCX) was the weakest link in your portfolio, giving back just 1%. All of your positions are above their 50-day moving averages and rated BUY.
Although I remain optimistic on the market’s outlook for the first half of 2012, I remain cautious as the major averages near strong, long-term resistance levels. Nearly every technical indicator imaginable is showing that the market is overbought. That situation has been the case for the past three weeks. Volume is slowing as traders become more wary of giving up their big January gains. Any break below these levels could trigger a quick and forceful sell-off as investors rush to lock in gains.
So this week, I am recommending that you tighten your stops on all of your Alpha Investor Letter positions. I’ve highlighted these prices in the Portfolio Update section below.
Yesterday, I attended a talk at the Economic Research Council, the oldest economic think tank in the United Kingdom. The topic was the euro zone and Greece. For all the remarkable performance of my
Bull Market Alert recommendation National Bank of Greece (NBG) this year, viewed through the cold, hard lens of economic statistics, prospects of a viable, long-term Greek bailout are grim indeed. At the same time, it’s hard to argue with the stock’s gains of 103.5% so far this year.
Portfolio Update
WisdomTree Japan SmallCap Dividend Fund (DFJ) rose 0.73% over the past week. Inflows to the DFJ’s “big brother” the MSCI Japan Index Fund (EWJ) hit a whopping $1.3 billion in 2011.This is good news as small caps generally outperform large caps, while also benefiting from a strong currency. DFJ is a BUY. Raise your stop to $41.50.
Las Vegas Sands Corp. (LVS) gained 3.97%, hitting a new 52-week high on Monday. The Standard & Poor’s rating service announced Tuesday that it would likely upgrade LVS’ credit rating in the coming weeks due to its improving financial outlook. LVS is a BUY. Raise your stop to $41.50.
MSCI South Korea Index (EWY) tacked on 2.30% last week. EWY spent a third week testing its 200-day moving average and managed to stay above it. The South Korean economy grew by 3.6% in 2011 and the Bank of Korea forecasts accelerating 3.7% and 4.2% growth rates in 2012 and 2013, respectively. EWY is a BUY. Raise your stop to $49.50.
MSCI Malaysia Index (EWM) moved up 2.69%. After spending a week testing its 200-day moving average, EWM made a decisive jump above this level last week. Malaysia will hold major elections in 2012, and the current prime minister is favored to win re-election. This political stability is positive economic news for the Malaysian stock market, as the prime minister is viewed as pro-growth. EWM is a BUY. Raise your stop to $12.90.
Market Vectors Russia ETF (RSX) jumped 5.72% last week. RSX has not posted a losing week since beginning its run in December 2011. Despite rumblings of a “Moscow Spring,” the Russian exchange-traded fund experienced a significant jump in asset inflows last week, with $141.6 million in new investment. This is a 7.8% increase week-over-week. RSX is a BUY. Raise your stop to $26.90.
iShares JPMorgan USD Emerging Markets Bond (EMB) rose 0.39% over the past five trading days. A recent article published by TheStreet.com placed EMB on its “Top Ten High-Yield & Emerging-Market Bond ETFs” listing. EMB ranked #1 in the “Emerging Market Bond ETFs” category. EMB is a BUY. Raise your stop to $107.50.
Market Vectors Indonesia Index ETF (IDX) gained 1.08%. IDX has spent the past three weeks in a rolling pattern moving sideways along its 200-day moving average. This type of action normally ends with a significant, sustained move in one direction. I’m betting that it will be upwards. IDX remains above its 50-day moving average and is a BUY. Raise your stop to $26.50.
iShares Singapore ETF (EWS) gained 2.75% over the past week. EWS has been on a tear for the past month, making gains nearly every trading day. EWS broke through its 200-day moving average this week. Singapore, like many Asian nations, is not immune to the European debt crisis. However, Singapore’s central bank recently announced the possibility of more easing in April, in an effort to head off any pull back in the economy. EWS is a BUY. Raise your stop to $11.40.
Berkshire Hathaway (BRK-B) rose 1.93% last week. BRK-B has been trading sideways for several weeks due to significant resistance at the $80 level — a level Berkshire Hathaway has not visited since October of 2011. BRK-B has tested this level three times in as many weeks and spent the past three days making bullish advances. Watch this battle closely as a break above $80 is likely the beginning of an extended climb. BRK-B is a BUY. Raise your stop to $72.50.
Listed Private Equity ETF (PSP) jumped 4.52% over the past five trading days. The upcoming initial public offering (IPO) for Facebook may be a reason. Once complete, several private equity and venture capital firms stand to reap huge paydays. Accel Partners’ early $12.7 million investment will top $9 billion from Facebook’s IPO, and Graylock Partners & Meritech Capital’s later $12.5 million investment will yield $1.5 billion. I recently met with John Powers, who heads the Stanford University Endowment, and he expects Stanford’s 1.5% stake in Facebook to be a nice boost to Stanford’s own cash pile of $19 billion. PSP is a BUY. Raise your stop to $8.00.
iShares MSCI Hong Kong Index (EWH) went up 1.12%. Like many of its sibling emerging market funds, EWH has been riding its 200-day moving average the past two weeks. Last Wednesday, Hong Kong’s financial chief John Tsang said Hong Kong’s economic growth forecast was for growth of 1%-3%, with stable inflation. EWH is a BUY. Raise your stop to $15.50.
Freeport McMoRan Copper & Gold Inc. (FCX) remained nearly flat, posting a 1% loss. FCX reported Tuesday that it would increase the annual dividend on its common stock from $1.00 to $1.25 a share. Chairman James Moffett stated that this increase “reflects our financial strength and positive outlook for our business.” FCX is taking a breather at the $46 level, while traders continue to adjust their positions on the back of the recent quarterly report. FCX is a BUY. Raise your stop to $35.00.
Visa Inc. (V) jumped 6.30%, hitting a new 52-week high at $108.27. Visa announced Monday that it has issued nearly one million Visa cards containing new EMV chip technology. This technology is the next frontier in electronic payments and makes fraudulent payments nearly impossible. Removing fraud from Visa’s business model translates into astronomical financial benefits to the company’s bottom line. V will report earnings on Feb 8. V is a BUY. Raise your stop to $94.50.
Ford Motor Co. (F) added 3.70% and continued its strong bounce back over the past two weeks. Auto stocks continue to shine in reaction to a wave of bullish news reports. Based upon the number of $3 million-per-thirty second automobile commercials played during last Sunday’s Super Bowl, I would say that this positive outlook may continue for quite some time. F is a BUY. Raise your stop to $10.40.
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