I’m going take a little bit of a break over the next few months, or slow down, with what I’m doing with the WallStreetWindow website and email list. I haven’t been doing much trading lately, putting out just one market update a week, usually on Monday, and I have several projects I want to work on. One is to start writing a book and I need to free up some of my time to do that. It takes me 90 minutes every morning to compile the headlines I do for my morning emails. I am planning to reduce the number of emails I am sending out down to at least one weekly Monday email each week for the time being, unless something really important in the markets happens. This week you’ll get one tomorrow, but I may not send another one until the following Monday.
As for the markets, I remain happy to have a good portion of my money in short-term CD’s and bonds and another portion in gold, silver, and mining stocks. We saw the the regional banking sector get smashed in March, which is likely to lead to a slowdown in bank lending, which will impact the economy, but as I look through things this week the internals of the market have improved a bit. Since March, the SPX has been pushed higher thanks to the influence of big cap tech stocks MSFT, GOOG, and AAPL. Those stocks went up more last week and got all the media attention, but when I look through all of the sectors inside the market this weekend many of them are lined up in a way in which they have gone sideways over the past few weeks and could breakout and rally too.
If they do, that will help the stock market rally for a few months.
To give you an example of what I am seeing, take a look at the chart for CZR.
I’d say half of the stock sectors inside the S&P 500 have a similar chart as CZR. So, they look like they are going to go up after Friday’s rally and could then breakout of consolidation patterns by the end of May. If they don’t breakout then they’ll have a failed rally and rollover, but most likely they will.
This is also the case with most global markets. Now European markets are near highs, as you can see from the EWG ETF.
European markets have been outperforming the S&P 500 since October – since this entire rally started and are likely to continue to do so for years, thanks to a weaker US dollar. All the European markets are at new highs for the year or closed on one Friday.
However, now it looks like emerging markets are in a position where they could rally and breakout to spark a move that could last for months too, as can see from the EEM ETF.
The important thing is that EEM has been a sideways pattern now all year. If it goes through it’s last peak around $40 it will likely rally from there for weeks or months. That’s how most of the sectors inside the stock market look like. Regional bank stocks are broken and aren’t going to help and REIT’s got smashed, but other than that most stock sectors look like they are ok and world markets remain fine.
Therefore, my outlook for the markets is more optimistic than it was a few weeks ago after the regional banks crashed.
The cyclical bull market calls some made earlier this may indeed come true – but again cyclical bull markets last 2-5 years, and this one would probably be one of the shorter ones like the 1970’s – and for the US stock market most of the gains for it already will have been made.
Diversification and controlling risk are the keys – and gold and silver, in my view, are a big part of that going forward now for a portfolio.
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-Mike
