Markets Bounce Strongly as Sentiment Improves

It was a strong week in stock markets this week, with the Dow Jones up 2.64%, the S&P 500 jumping 2.97% and NASDAQ rising 4.13%. The MCSI Emerging Markets Index soared 3.53%.

Big gainers in your Alpha Investor Letter portfolio included PayPal Holdings (PYPL), which rocketed 10.63%, PureFunds ISE Cyber Security ETF (HACK), which rose 8.19%, Illumina Inc. (ILMN), which moved 6.38% higher, and Apple Inc. (AAPL) and Phillips 66 (PSX), which each rose 6.17%.

A whole slew of positions moved above their 50-day moving averages (MA) and changed to “Buy.” These include the Vanguard Russell 2000 Index ETF (VTWO), Markel Corp. (MKL), Google Inc. (GOOGL), First Trust US IPO ETF (FPX), Guggenheim S&P 500 Equal Weight ETF (RSP), Vanguard Global ex-US Real Estate ETF (VNQI), Guggenheim Spin-Off (CSD), Global X Guru ETF (GURU), iShares Currency Hedged MSCI Germany (HEWG), Apple Inc. (AAPL) and Phillips 66 (PSX).

Yesterday, markets had their strongest day of trading since January. After many months of “fear,” CNN’s market sentiment index has switched to “greed” for the first time in 2016.

It was a strong finish to the first three-month losing streak for the market since 2011. The market is showing resilience, and starting to shake off disappointing Chinese PMI readings and worries surrounding European banks.

With the market up about 8% in just over two weeks and oil consistently above $30 for over one week, some of the biggest concerns about recession are off the table.

Looking ahead, I believe the best-positioned names remain in the technology and healthcare sectors, where company-specific drivers and innovation boost their forward prospects. In addition, I expect big bounces in the energy sector as the price of oil stabilizes.

At the moment, I am on my way out the door travelling to The MoneyShow in Orlando, Florida, which happens this week. There is still time to receive free admission to The MoneyShow 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.

Portfolio Update

Berkshire Hathaway (BRK-B) jumped 4.74% last week, pushing above its 200-day MA. Berkshire Hathaway reported fourth-quarter 2015 earnings last Saturday, beating analysts’ consensus estimates. In terms of its Class A shares (BRK-A), Berkshire Hathaway’s earnings per share (EPS) rose to $2,843.00, from $2,412.00 one year ago, beating the forecast of $2,813.90. Total revenue for the company’s 2015 fiscal year came in at $210.82 billion, up from $194.67 billion last year, beating the $210.33 billion consensus estimate. Perhaps the best insight we got from Berkshire’s earnings release was Warren Buffett’s statement that it’s “been a terrible mistake to bet against America, and now is no time to start. America’s golden goose of commerce and innovation will continue to lay more and larger eggs.” BRK-B is a BUY.

Cambria Global Value ETF (GVAL) added 1.73%. This exchange-traded fund (ETF) holds nearly $60 million in assets and scans markets for opportunity in 45 emerging and developed countries, including the United States. GVAL’s investment targets fall within the cheapest 25% of this group, based upon several valuation criteria. Finally, 100 stocks with market capitalizations of more than $200 million are selected for investment. GVAL closed trading yesterday just short of its 50-day MA and is a HOLD at the moment.

Guggenheim S&P 500 Equal Weight ETF (RSP) rose 3.46% last week. As markets have fallen over recent weeks, RSP has typically fallen more than the S&P 500 Index. This is because of the relative “overweighting” of more volatile, smaller-cap stocks due to RSP’s equal weighting of the S&P 500. With markets moving into their third week of gains, RSP handily beat the S&P 500’s ​2.97​% gain last week. RSP is a BUY.

PayPal Holdings (PYPL) rocketed 10.63% higher over the past five trading days. Analysts at the investment bank Jefferies recently reiterated a “Buy” rating and $44 price target for PayPal. Further upside potential was also highlighted as Jefferies believes that the impact of startup PayPal service Venmo has not yet been factored into PYPL’s stock price, adding to last week’s price jump. PYPL is a BUY.

Market Vectors Biotech ETF (BBH) climbed 3.81%. Biotech has been a long-held and profitable theme in your Alpha Investor Letter portfolio. The recent correction in BBH, and current technical chart pattern, shows positive weeks ahead for this ETF. BBH’s long, orderly sell-off, ending in a textbook “inverse head-and-shoulder” chart pattern at the 52-week low, makes a very strong case for future higher stock prices and an excellent current buying opportunity. BBH is a HOLD.

Costco Wholesale Corporation (COST) closed out the week flat as traders remained subdued in anticipation of its upcoming quarterly earnings report. COST will report earnings today (Wednesday) after the markets close. Costco has been trading along its 200-day MA since early 2016, dipping below the mighty 200-day one month ago to test its recent lows. COST is a HOLD.