Solid Week as Markets Continue to Bounce

It was a solid week for stock markets across the globe, with the Dow Jones up 1.45%, the S&P 500 rising 1.36% and the NASDAQ jumping 1.52%. The MCSI Emerging Markets Index also jumped 1.20%.

Big gainers in your Alpha Investor Letter portfolio included the Guggenheim Spin-Off (CSD) leaping 3.49%, the PureFunds ISE Cyber Security ETF (HACK) climbing 3.14%, First Trust US IPO ETF (FPX) gaining 2.91%, KraneShares CSI China Internet ETF (KWEB) rising 2.67%, The Walt Disney Company (DIS) jumping 2.66%, AdvisorShares TrimTabs Float Shrink ETF (TTFS) up 2.45% and Markel Corp. (MKL) recovering 2.40%.

Several positions in your portfolio, including Berkshire Hathaway (BRK-B), Markel Corp. (MKL) and AdvisorShares TrimTabs Float Shrink ETF (TTFS), rose back above their 50-day moving averages (MA) and are back to a BUY.

Markets are at a crucial juncture.

On the one hand, chart readers are excited at the “double bottom” they have seen in the S&P 500. This is one of the most positive patterns in technical analysis.

On the other hand, the S&P 500 yesterday failed to penetrate the crucial 50-day moving average. Taken on its own, that is bearish sign.

That said, on balance, most market sentiment indicators of the past few months suggest the market is oversold and is due for a move up.

Still, it is a very tough time to be making money in the markets. Consider the two-year chart of the S&P 500 below.

                                           2 Year Chart of S&P 500

It confirms that the S&P 500 is up a mere 4.04% since February 25, 2014. Yesterday, the S&P 500 closed where it first traded on May 29, 2014. That’s a span of about 450 trading days.

The best strategy in these choppy markets?

As the Brits were told during the German bombings of London, “Keep calm and carry on.”

And keep in mind that “smart money” with long historical perspective like Warren Buffett is buying stocks hand over fist.

Portfolio Update

Berkshire Hathaway (BRK-B) gained 1.70% over the previous week. BRK-B will report earnings on Friday. Berkshire Hathaway does not file a traditional earnings report as compared to the majority of publicly traded firms. Mr. Buffett’s company is a combination of a private equity firm, a business development company and a mutual fund — making its earnings reports a bit more involved. BRK-B rose above its 50-day MA last week and changed to a BUY.

Markel Corp. (MKL) rose 2.40%. Investors are still positive on MKL after Markel’s recent robust earnings report. Gains continued last week and pushed MKL back above its 50-day MA. MKL is now a BUY.

First Trust US IPO ETF (FPX) added 2.91% over the past five-day trading period. Initial public offerings (IPOs) have been very quiet over the past two months as market gyrations have all but dried up the market. However, the IPO outlook is starting to show “green shoots,” and IPOs should bloom in the coming weeks. With 126 companies waiting in the wings with filed paperwork and seeking a total $28.9 billion in capital, the seeds are ripe for sprouting this spring. FPX is a HOLD.

The Walt Disney Company (DIS) rose 2.66%. If you’re a technical analysis wonk, or just want to see an excellent example of a positive stock chart, a DIS one-year/daily chart includes many basic positive components. This chart displays a long, orderly recent sell-off closing right at the point of a positive earnings report, a 52-week low and the tip of an “inverted head-and-shoulders” pattern. This is all taking place at the $90 price level — a support level well-established back in late August 2015. With the next Star Wars movie slated for 2017, this is just icing on the cake and grease on the skids. DIS is a HOLD for now.

Illumina Inc. (ILMN) moved 0.56% higher. Companies that have strong sales-per-share (SPS) metrics are firms that have shown robust growth in sales and earnings figures over the past year. More specifically, these are firms that have grown SPS, reported positive earnings and experienced earnings per share (EPS) growth over the last 12 months. Illumina falls on a short list with 12-month SPS at 19% and 12-month EPS at 31%. This makes a strong case for ILMN to be a winning horse after the gates open when the current market correction ends. ILMN is a HOLD.

Phillips 66 (PSX) traded sideways last week, taking a breather from a strong jump the week prior on news of Warren Buffett’s recent buying spree. It is likely that traders will continue buying once again after the recent news-driven excitement consolidates a bit. PSX is currently riding the 50-day MA, swinging both above and below this line, but stands at a HOLD as of this writing.

Join me at The MoneyShow in Orlando, March 2-5!

Receive free admission to the MoneyShow in Orlando, Florida, as a guest of Eagle Financial Publications and me. The show’s new venue is at Disney’s Contemporary Resort near the company’s famous theme parks. I especially encourage you to attend my presentations, as well as those of my colleagues Bryan Perry and Dr. Mark Skousen, among more than 150 other speakers who will address a range of income and growth investments. Register today.