The Sun Also Rises – 08/12/2014

First, I’d like to thank Kevin Cook for handling this commentary while I was on vacation in Maui. Unfortunately it seems that the wicked storms were not isolated to the Hawaiian Islands as stock investors got soaked as well.

Gladly in the last two sessions we have seen some sunshine returning to the market. And that is the natural order of things when you have economic data this good and bond rates this low.

Plain and simple, the end of the 5 year bull market is nowhere in sight. Meaning that the recent drop was nothing more than a standard pullback which paves the way for the next run higher. That is why stocks are rebounding from recent lows…and why I recommend being 100% long at this stage.

Best,

Steve Reitmeister ( aka Reity…pronounced “Righty” )

Executive Vice President

Zacks Investment Research

2 Victories in Friday’s Action – 08/11/2014

Kevin Cook here to kick off the week for Steve…

The two victories I am talking about do not involve US air strikes on Iraqi bullies hurting the innocent, nor Putin concluding his military muscle-flexing near the Ukraine border.

The two victories are both about Friday’s price action fulfilling some degree of the “flush-and-reverse-higher” event that I was looking for – but in the S&P futures.

First, the futures went hard red Thursday evening and were joined by Japanese stocks down 3%. We got a puncture of 1900 and a hard bounce off of 1890 before we even knew the airstrikes were complete or Putin had hit the showers.

Second, by the time stocks opened at 1910, it was a steady train of buying all day to close above the 100-day moving average and the two prior days’ resistance at 1930.

Will Monday’s action follow-through and give us a run to the 50-day at 1955, or do nervous bulls still feel the need to hit the eject button on their stocks? I’m not certain, but either way, if another test of 1900 is in the cards I would still be a buyer.

Best,

Kevin Cook

Senior Stock Strategist

Zacks Investment Research

Why Mr. Market Needs a Quick Cleanse – 08/08/2014

Why Mr. Market Needs a Quick Cleanse

Kevin Cook here for Steve…

Talk about a slow-motion correction that would put even Marc Faber to sleep! Early in the week I said to watch the Nasdaq 100 (QQQ) for clues about market strength or weakness. Thursday it barely inched down to close on its 50-day MA as the SPX crept quietly below its 100-day.

Even the VIX couldn’t muster a close above 17 as the Dow kissed its 200-day. So while the SPX could mount a rally after touching the 1905 level, I think we need a good round of panic selling below 1900 to move this market from weak hands to strong.

That has been my main theme this week: the market is approaching a good buy zone and you want to have your shopping list ready.

Best,

Kevin Cook

Senior Stock Strategist

Zacks Investment Research

Why 1900 Will Bring Buyers – 08/06/2014

Kevin Cook here for Steve…

After a solid Factory Orders report and a blow-out ISM Services survey – the strongest monthly growth of the entire recovery led by construction but including 16 of 18 industries – the market seemed bored with great economic data and merely drifted sideways around SPX 1930 most of the day.

Then somebody in Europe shouted “Putin is coming!” and stocks dropped quickly with the SPX taking out 1920 and last week’s low. But I’m here to tell you that a short-term low is close at hand. Here’s a confluence of key technical indicators I’m watching that tell me buyers will take control again soon near SPX 1900…

•  100-day moving average is at SPX 1912

•  50% retracement of April-July rally is around 1902

•  Breakout gap of May 27 is also between 1900 and 1905

•  1880-1900 as top of last consolidation will see lots of buyers

•  NYSE Advance-Decline statistics did not make new lows yesterday

That last point is about the depth and breadth of selling, such that even while the SPX made new lows, there was no panic selling like we saw last week. This doesn’t mean we absolutely avoid another fear-filled session. It just means the odds favor a strong turn-around even if we puncture 1900 in the next day or three.

Best,

Kevin Cook

Senior Stock Strategist

Zacks Investment Research

Bounce Back to the 50-Day – 08/05/2014

Kevin Cook here for Steve…

After Friday’s slow down in selling momentum, Monday brought buyers back into stocks, especially in the Energy sector which bested the broad market 2-to-1. Then again, Energy led all sectors lower last week with a -4% drubbing.

While I still believe that we will only see a bounce back above the S&P’s 50-day moving average this week before the selling pressure resumes below 1960, the sector to watch is Technology.

With an 18.5% weighting in the index, and the big rotation to big caps in the past few months, Technology has probably kept things from falling apart faster. Evidence is in the Nasdaq 100 (QQQ), the only index still above its 50-day.

Bottom line: We’ve got a light economic calendar this week, so let’s watch the price action and volume in big cap Tech and see if this strong sector can lift the rest beyond more than a relief rally.

Best,

Kevin Cook

Senior Stock Strategist

Zacks Investment Research

Correction Mode: Raise Cash, Be Selective – 08/04/2014

Kevin Cook here for Steve all week…

Let me first say that I am not calling (right now) for a full 10% correction that takes the S&P 500 below 1800. There are plenty of fundamental reasons to believe that institutional investors still have a strong appetite for stocks that will push indexes to new highs this year.

And the longer-term technical strength of the S&P index is still intact, with many support levels between 1900 and 1850, long before we get to really important buying opportunities under 1800.

But as I outlined on Friday, there are also plenty of reasons for large investors to “take a break” and reduce risk while raising cash for better opportunities down the road. Periods of unbridled optimism for stocks should occasionally give way to shorter periods of pessimism. It’s how you fill the gas tank again to go higher.

There’s no hurry to buy the dip this time because last Thursday’s selling indicated a level of liquidation consistent with heavy institutional distribution. That means more selling will follow as the big players watch each other and wait, as they did Friday.

Bottom line: Sell the rallies, prepare your shopping list, and wait for better bargains.

Best,

Kevin Cook

Senior Stock Strategist

Zacks Investment Research

Pay attention here – 04/29/2014

ZACKS

Are Institutions Selling?

Kevin Cook here for Steve…

The ongoing correction in growth stocks, broadly illustrated by the Nasdaq and Russell 2000 indexes 7% and 8% off their highs, doesn’t seem to be dragging down the S&P 500, which is off only 1.5%. One reason is that money is simply rotating into big cap safety instead of running to cash.

So the big question is this: “Can strong earnings and guidance from our top companies generate a rally to new highs before the ‘sell in May’ alarms start ringing -even as the growth indexes once again flirt with their 200-day moving averages?”

My answer this month has been that institutional investors would be pleased with this earnings season and spur a drive to new highs. But what may finally be coming home to roost is that the market ran well ahead of some of the best expectations for growth in the past year.

Therefore, if earnings estimates don’t at least match last year’s 5-6% EPS growth, the market will have a hard time moving higher from here. And if institutions in the aggregate take this view, then we’ll see the S&P move lower through support in the 1820-50 zone as they become net sellers and foreshadow a deeper correction.

Bottom line: Until that happens, it will pay to stay bullish above that zone and buy dips within it.

Best,

Kevin Cook

Senior Stock Strategist

Zacks Investment Research