U.S. and global stock markets closed a mixed week, even as sentiment about the U.S. stock market reached highs not seen in years.
The S&P 500 rose 0.43%, while the Dow Jones powered ahead 1.93%. Both the Nasdaq and the MSCI Emerging Markets Index pulled back, closing the week down 0.7% and 1.08%, respectively.
Your Smart Money Masters portfolio continued to march to the beat of its own drummer.
Carl Icahn’s PayPal Holdings (PYPL) continued to dominate in terms of performance, rising 5.31%. The stock is now up over 72% since my initial recommendation. Raise your stop to $65.30 to lock in at least a 60% gain. Prem Watsa’s bet on BlackBerry (BB) jumped another 4.52%. This position is now up over 50%.
Dan Loeb’s Baxter International (BAX) gained 3.58%. Howard Marks’ Vistra Energy Corp. (VST) gained 3%. Charlie Munger’s favorite stock, Costco (COST), rose 2.47%.
Six of your positions sport double-digit-percentage gains. Kraft Heinz (KHC), Liberty Broadband (LBRDK) and The St. Joe Company (JOE) are still trading below their 50-day moving averages and are currently HOLDs.
The U.S. stock market, as measured by the major averages, continues to soar.
As the folks at sentimentrader.com pointed out, last week was the perfect week for the S&P 500.
The S&P 500 hit a record high every day last week. It has also hit a record weekly close for six straight weeks.
Finally, it has hit a record monthly close for seven months. That’s 18 consecutive record closes over daily, weekly and monthly time frames. That has never been seen before in market history.
But there are warning signs.
The rally in the Dow has been incredibly narrow, with a single stock, 3M (MMM), accounting for 54% of its gains on Tuesday.
The S&P’s Relative Strength Index (RSI) has been in overbought territory for three straight weeks, the longest stretch in more than 20 years.
The other times it was so overbought for so long while at a high, it struggled for the next two months.
The bottom line is that cracks are appearing in the sustainability of the U.S. stock market rally. But for now, the trend is your friend.
Nicholas A. Vardy