March 9, 2015
Market Strategies Newsletter
Sample Issue
Covering High Return Balanced Investing Strategies To
Make Money In Up Or Down Markets
A Publication of Princeton Research, Inc. (www.PrincetonResearch.com)
Contributing Staff: Michael King, Charles Moskowitz
Where To Invest In 2015
Stock Options Trading Newsletter Covering:
Where to Invest March 2015
Best Stocks To Buy March 2015
Stock Market Investing Strategies
Stock Options Trade Alerts
Options Trading Strategies
How To Trade Options
2015 Year To Date Profits $ 3,652
Over 36% Returns
2014 Profits = $ 20,443
Over 204% Returns
$20,443 Profits for $10,000 Trading Account
By Following all trades in 2014 a
$10,000 account would be worth $30,443
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High Return Investments Trade Alerts
Go To: PrincetonResearch.com/alerts.htm
NOTE: This is a Sample Issue Only!
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Where to Invest March 2015
Market Strategies
$10,000 Trading Account Traders Comments
We have five open long positions:
6 AA April 15 Calls
20 ARRY March 9 Calls @ 0.30
10 ARRY March 9 Calls @ 0.18
NAT March $ 10 Calls
SPY March 209 Puts
Funds in Use $ 1,710
Loss last week $100
DID YOU HEAR THE BELL @ NASDAQ 5000 ???
Week 9 was a small loss of $100 bringing our YTD gains back to $3,652 with only 4 open positions utilizing $1,710. Actually, a $100 loss on a week like this past one was just fine with me.
The market turned on a dime from the 15 year high close on NASDAQ @ 5008.10 pulling back 1.5%.
As discussed in this space recently, I am concerned about the narrowness of the rally.
AAPL moving into the Dow will increase volatility, and since it generally fades after new product releases, maybe not in a good way.
While I love their products, I’m more concerned with the technicals of the stock. After the last big rally and peak (10/15/14-11/25/14) from $95 to $117, it moved sideways and lower down to $104 has now rallied to $131.17. It also closed below the short term (13 day) moving average on Wednesday and really doesn’t have much support until $120. If that doesn’t hold, we could go toward the gap around $113.
Another issue is the “This time it’s different” mantra being front and center in the financial media. Clearly the NASDAQ is broader and more diversified but traders are still traders and the confluence of fear and greed never changes… Something disturbing will occur, be it geopolitical or fundamental, and buyers will want to stand aside and the momentum will shift. Maybe not for long but certainly this market is no stranger to sharp declines. If it’s not Internet, it could be biotech or any other group.
We went back into a long position in OSIR on Thursday. For those of you who don’t recall we were in this in July 2013 around the $10 area when they had news and saw a 2 day move from $12 to $27. We are not in the options since they are highly illiquid, but the stock has been consolidating for 16-18 months between $12 and $17.50 and when they reported earnings this week and it came back down to support I jumped on it.
Resistance is around $20.25 but Fridays’ close of $18.40 is the highest close in over 2 years. While this group is probably the one with the bulls-eye on it’s back since it’s run so far, there is a deal or an announcement of an approval everyday causing major moves in the target or recipient of an approval. As I mentioned on the liquidation of the SLXP position, we don’t buy for takeovers. We bought OSIR at support, and we will use a stop at $15.89 (just below last weeks low).
CAM
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High Return Investments Trade Alerts
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Market Strategies $10,000 Trading Account Trade Table
New Trades:
1) Buy 4 AAPL March 125 Puts @ $ 1.80 O.B. (Or Better)
2) Buy 4 UAL April 70 Calls @ $ 1.90 O.B.
DATE
TRADES
PRICE
COST
PROCEEDS
RESULTS
03/06
Sold 2 SPY March 209 Puts
3.60
720
360 Gain
03/03
Sold 8 VJET March 10 Calls( 50% Rule plus Gap Down
0.10
80
240 Loss
03/02
Sold 10 RWM March 16 Calls ( 50% Rule Plus Gap Down
0.08
80
220 Loss
03/02
Bought 4 SPY March 209 Puts
1.80
720
02/25
Bought 10 ARRY March 9 Calls
0.18
180
02/24
Sold 10 TJX March 72.50 Calls
0.25
250
350 Loss
02/23
Bought 20 ARRY March 9 Calls
0.30
600
02/19
Bought 8 VJET March 10 Calls
0.40
320
02/17
Bought 10 TJX March 72.50 Calls
0.60
600
02/13
Bought 8 NAT March 10 Calls
0.60
600
02/06
Bought 10 RWM March 16 Calls
0.30
300
Remember, these trades are based on your participation in the
Subscriber Members Only
TEXTING SERVICE TO RECEIVE ALL UPDATES.
Previous closed out trades not listed here may be seen in previous market letters in the
VIP Subscribers Members Area.
NOTE: In texting we have a limited amount of words. In the interest of brevity:
The Quantity and Strike Price for each trade is specific. 1=January, 2=February
Trading is hypothetical. We may trade weekly options and they are noted: SPY 1/25 147 for
SPY Jan 25th 147 Calls or Puts.
Best Stocks To Buy March 2015
NOTE: This is a Sample Issue Only!
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MARKET Laboratory – Weekly Changes
Prices are copied from Barron’s Weekly and Yahoo Finance and may be incorrect.
Dow
17,856.78
-275.92
-1.52%
Nasdaq
4927.37
-38.16
-0.73%
S&P 500
2071.26
-33.24
-1.58%
Transportation
8907.41
-117.11
-1.30%
Russell 2000
1217.52
-15.85
-1.29%
Nasdaq100
4399.23
-41.44
-0.93%
Gold (spot)
1164.10
-48.50
-0.4%
Silver
1580.7
-75.1
-4.6%
Crude
49.61
-0.15
-0.3%
Heating Oil
186.90
-10.47
-5.3%
Unleaded Gas
1.8819
-0.0960
-4.9%
Natural Gas
2.839
+0.105
+3.8%
VIX
15.20
+1.86
+13.9%
Put/Call Ratios
S&P 100
129/100’s
-19/100’s
Put/Call Ratios
CBOE Equity
63/100’s
0/100’s
Bonds
143-12 -3-21
2.81% +0.22%
10 Yr. Note
126-02 -1-234 2.20%+0.19%
Copper
260.90
-8.25
-3.1%
CRB Inflation
Index
220.14
-3.94
-1.8%
Barron’s* Confidence
78.7%
+0.7%
S&P100
912.0
-13.47
-1.46%
5 Yr. Note
118-114 -296
1.68% +0.14 %
Dollar
97.72
+2.47
+2.6%
DJ Utilities
570.03
-24.14
-4.06%
AAII
Confidence
Index
Bullish
39.8%
-5.6%
Bearish
23.4%
+3.1%
Neutral
36.8%
+2.5%
M1 Money Supply
+10.26%
February 23rd
M-2 Money
Supply
+6.52%
February 23rd
* Component Change in the Confidence Index
M1…all money in hands of the public, Time Deposits Traveler’s Checks, Demand Deposits
M2.. adds Savings and Money Market Accounts both compared with the previous year.
Stock Market Investing Strategies
Market Strategies Technical Information
Support Levels S&P 500 2051
Resistance S&P 500 2093
Support Levels DOW 17,740
Resistance DOW 17,885
Support Levels QQQ 107.00
Resistance QQQ 108.30
Support Levels NASDAQ 4860
Resistance NASDAQ 4970
Closes below support triggers sales/above highs buys
Stock Options Trade Alerts
$100,000 Trading Portfolio Stock Positions and New Trades
1) Buy 50 shares SCO @ mkt ( mkt means market order )
2) Sell 150 shares CALM @ mkt
Each stock is allocated a theoretical $ 5,000 share of the portfolio unless otherwise indicated.
Stock
Purchase Price
Purchase Date
Stop/Loss
Price/Date Sold
Profit/
(Loss)
OSIR 300
16.34
03/04
ARRY 500
8.02
02/24
CALM 150
37.17
02/23
UWTI 1200
3.55
02/17
2.87 sco
2.84 02/26
( $ 852 )
FORM 500
8.56
02/13
NAT 500
10.16
02/13
ENZ 1200
3.39
02/06
2.89
2.89 02/23
( $ 600 )
BAC. Wts 5,000 lots
0.7411
12/26
BSBR 500
4.84
12/18
BCRH 300
16.84
12/18
SAN 600
8.40
12/16
SLXP 50
100.80
11/25
156.36 02/23
$ 2778
FB 100
74.18
11/24
XCO 1200
3.10
11/28
INO 500
9.92
11/17
AA 500
14.21
10/16
FCX 150
34.99
09/09
NBG 300
2.95
05/19
XRGYF 5000*
0.407
03/14
RPTP 400
15.37
01/16
NBG 300
4.08
8/12
TEXQY* 200
6.56
7/11
REPR* 5000
0.22
10/22/12
.12 sco
Remember, these trades are based on your participation in the
Subscriber Members Only
TEXTING SERVICE TO RECEIVE ALL UPDATES.
Previous closed out trades not listed here may be seen in previous market letters in the
VIP Subscribers Members Area.
For those of you who do not buy puts to protect your portfolio, there are many ETF’s that are the inverse of the DOW. The symbols are DOG, DXD, SDS,TZA and RWM, which go up when the DOW, S&P 500 and Russell 2000 go down and down when they go up. The DZZ goes up double when gold goes down.
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Options Trading Strategies
How To Trade Options
Market Strategies $100,000 Trading Account
New Options Trades:
1) Buy 8 AAPL March 125 Puts @ $ 1.80 O.B.
2) Buy 8 UAL April 70 Calls @ $ 1.90 O.B.
There were three closed long option positions:
RWM losing $440
VJET lost $480
The S&P Puts doubled necessitating selling half on the double gaining $ 720.
The result was a loss on closed positions of $ 200 with four lots of the S&P Puts remaining.
There were no closed stock positions.
For the full year to date, we have gains of $ 13,290.
Open position losses increased to $ 11,454.
There are five long Open Options positions:
Long Alcoa Calls
Two separate positions of ARRY, one of 40 lots, the other 20
NAT March 10 Calls and
SPY March 209 Puts
The Stock table has the following 21 positions:
AA, ARRY, BAC.B.WS, BCRH, BSBR, CALM, FB, FCX, FORM,
INO, NAT, NBG (3), OSIR, REPR, RPTP, SAN, TEXQY, XCO, XRGYF
The options call for a $ 2,500 investment unless otherwise stated; each stock position requires $5,000 unless otherwise specifically stated.
We are basing money management on a hypothetical
$ 100,000 and are using a total of
$ 87,158 for the 21 open stock positions. There are five option long positions requiring
$ 3,420 totaling
$ 90,578 leaving
$ 9,422 in cash.
These figures are approximate and there might be errors.
We have not counted the dividends received from Apple, JP Morgan, BSBR ( Brazil ), Santander, Blue Capital Reinsurance and others. Blue Capital issued a special extra dividend of $ 0.66 per share which enabled us to reduce our cost by that amount. In addition it pays about 7% per year in regular dividends.
We do not count commission costs and all trading once again is hypothetical.
Executions that have occurred at or near the open or close of trading sometimes vary from our
actual numbers. For example, when something opens down and it is through our price, we take the next trade whether it is an uptick or continues lower. This sometimes results in a 50% trade that is slightly above or below the exact number…
Previous Week’s Recommendations and
Rules for the Market Strategies
$100,000 Portfolio Trading Account
All options count for about $ 2,500.00 for model portfolio calculations unless
otherwise stated
When the option has doubled sell half the position
Stop Loss protection is either half or offered with each trade
The cost of the option is the asking price (or the price between the bid and ask,
whichever is more realistic)
The options will be followed until closed out.
Option Symbols are stock symbol with expiration month and strike price
Option
Cost
Date
Sold
Date
Profit/
(Loss)
SPY March 209
8 lots
Puts
1.80
03/02/15
3.60
( Sold Half on 100% Profit Rule )
03/06/15
$ 720
ARRY March 9
20 lots
Calls
0.18
02/25/15
ARRY March 9
40 lots
Calls
0.30
02/23/15
VJET March 10
16 lots
Calls
0.40
02/19/15
0.10
( Sold 50% Rule Plus Gap )
03/03/15
( $ 480 )
NAT March 10
16 lots
Calls
0.60
02/13/15
RWM March 16
20 lots
Calls
0.30
02/06/15
0.08
( Sold 50% Rule Plus GAP )
03/02/15
( $ 440 )
Remember, these trades are based on your participation in the
Subscriber Members Only
TEXTING SERVICE TO RECEIVE ALL UPDATES.
Previous closed out trades not listed here may be seen in previous market letters in the
VIP Subscribers Members Area.
This Weeks’ Economic Numbers and Media Data
Earnings Reports Before the Open on Top of the Row;
After the Close are Below the Economics Numbers.
Monday
Bitauto Holdings ( BITA 0.62 vs 0.40 )
Pozen ( POZN 0.15 vs -0.07 )
08:30 hrs Personal Income Jan ( 0.4% vs 0.3% )
Personal Spending ( -0.1% vs -0.3% )
CORE PCE-Prices ( 0.2% vs 0.0% )
10:00 hrs ISM Index Feb ( 53.0 vs 53.5 )
10:00 hrs Construction Spending Jan ( 0.2% vs 0.4% )
Casey’s General ( CASY 0.78 vs 0.30 )
Mindray Medical MR ( 0.44 vs 0.62 )
Urban Outfitters ( URBN 0.57 vs 0.59 )
Westport Innovations( WPRT -0.47 vs-0.51 )
Tuesday
Barnes and Noble ( BKS 1.19 vs 0.86 ) S
uperior Industries ( SUP 0.15 vs 0.23 )
10:00 hrs Wholesale Inventories Jan ( -0.3% vs 0.1% )
10:00 hrs JOLTS- Job Openings Jan ( NA vs 5.028 Mln )
Dynamic Materials ( BOOM 0.18 vs 0.02 )
Ocwen Financial ( OCN -0.61 vs 0.74 )
Wednesday
Brown Shoe ( BWS 0.16 vs 0.14 )
Fuel Systems Solutions ( -0.20 vs -0.16 )
07:00 hrs MBA Mortgage Index 03/07 ( NA vs 0.1% )
10:30 hrs Crude Inventories 03/07 ( NA vs 10.303 Mln Bbls )
14:00 hrs Treasury Budget Feb ( NA vs -$193.5Bln )
Men’s Wearhouse ( MW -0.07 vs -0.38 )
Molycorp ( MCP ( -0.26 vs -0.28 )
Thursday
Dollar General ( DG 1.17 vs 1.01 )
Genesco GCO ( 2.38 vs 2.07 )
JA Solar ( JASO 0.26 vs 0.16 )
Kirklands ( KIRK 0.87 vs 0.69 )
Repligen ( RGEN 0.04 vs 0.10 )
08:30 hrs Initial Claims 03/07 ( 306K vs 320K )
Continuing Claims 02/28 ( 2421K vs 2421K )
08:30 hrs Retail Sales Feb ( 0.4% vs -0.8% )
Retail Sales ex-Auto Feb +0.6% vs -0.9% )
08:30 hrs Unit Labor Costs – Rev 4th Qtr ( 2.9% vs 2.7% )
08:30 hrs Export Prices ex-Agriculture Feb ( NA vs -1.0% )
Import Prices ex-Oil Feb ( NA vs -0.7% )
10:00 hrs Business Inventories Jan ( 0.1% vs 0.1% )
10:30 hrs Natural Gas Inventories 03/07 ( NA vs -228bcf )
Aeropostale ( ARO -0.03 vs -0.35 )
Jamba ( JMBA -0.34 vs -0.33 )
Inogen ( INGN 0.02 vs 0.89 )
Paragon Shipping ( -0.34 )
Ulta Salon ( ULTA 1.28 vs 1.09 )
Friday
ANN ( ANN -0.02 vs 0.10 )
Buckle ( BKE 1.24 vs 1.23 )
EBIX ( EBIX 0.39 vs 0.40 )
Hibbett Sport ( HIBB 0.68 vs 0.64 )
Travel Centers of America ( TA 0.03 vs 0.39 )
08:30 hrs PPI Feb ( +0.3% vs -0.8% )
CORE PPI ( +0.1% vs +0.1% )
10:00 hrs Michigan Sentiment Mar ( 95.8 vs 95.4 )
Market Strategies Fundamentals
The Dow was down this week after a record-setting start. It fell 276 points over 5 days, and closed the week at 17,856.78, off 275.82 or 1.52%. The NASDAQ and S&P 500 both lost ground as well, with the NASDAQ falling 36 points. The NASDAQ, which crossed the 5000 mark for the first time since 2000, made a key reversal week, an outside week down closing below the previous week the week down to 4,927.37. The S&P 500 ended at 2,071.26, off 33 points or 1.6%. Another big story was the huge loss in Utilities. The Dow Jones Utilities Index fell the most of any index, losing 24.14, or 4.06% another large weekly loss. Since January 29th the DJ Utility Index is off 12.8%.
The Hang Seng index, not to be outdone, lost over 400 points. Losses were initiated by the high number of the jobs report which stoked fears of a Fed rate hike.
the U.S. Dollar hit its highest level since 2003, before rising oil prices and current account deficits pushed the index as low as 71 in 2007. It rose 125 ticks or 1.29% to 97.63, on the back of a non-farm payroll report that showed the U.S. economy created more jobs in February than expected (Actual 295K, Briefing.com consensus 240K, Prior 257K). The details of the employment report were not as encouraging, but the fundamentals of the Dollar Index rally (Eurozone weakness, lower oil prices, more energy production in the U.S, and all over the world is creating a foundation of delation.
Treasuries ended a tough week with a very bad day on the back of a February employment report that was encouraging, at least on its face. While the report was inconclusive, the Treasury market’s rally between mid-December and February was likely driven by a lot of short positions blowing out and momentum trading, and the trend lower has not been ambiguous at all. The 2-year note held up better than the belly and long end of the curve, falling “only” 8 basis points to 0.72%
Yield check:
2-yr: +8 bps to 0.72%
5-yr: +13 bps to 1.7%
10-yr: +13 bps to 2.24
30-yr: +11 bps to 2.84%
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Market Strategies Economic Data
February Nonfarm Payrolls
Nonfarm payrolls added 295,000 jobs in February well above the consensus at a + 240K jobs after adding a downwardly revised 239,000 (from 257,000) in January. The unemployment rate fell to 5.5% in February from 5.7% in January. The consensus expected the unemployment rate to fall to 5.6%.
Updated: 06-Mar-15 10:49 ET
Highlights
Headline payrolls topped expectations, which is generally a good result. However, average hourly earnings increased marginally (0.1%) after growing by 0.5% in January. Productivity was lower. Lackluster wage growth combined with the improvement in payrolls led to a 0.4% increase in aggregate wages. To put that in perspective, even after the downward revision to the January payroll numbers, income did increase a much stronger 0.7% last month.
Since consumption growth, and economic growth in general, follow the trend in income, the February employment results were decidedly worse than January even though this month’s headline payroll number far exceeded both expectations and the prior level. The number is not as strong as the headline would suggest. The decline in the unemployment rate was completely due to another exodus in labor market participation. The participation rate dropped to 62.8% in February from 62.9% in January. If the labor force participation rate remained at January levels, the unemployment rate would have remained at 5.7%.
The February employment data was not bad, but not necessarily good either.
Category
FEB
JAN
DEC
NOV
OCT
Establishment Survey
Nonfarm Payrolls
295K
239K
329K
423K
221K
Goods-Producing
29K
64K
64K
76K
34K
Construction
29K
49K
44K
30K
10K
Manufacturing
8K
21K
19K
45K
23K
Service-Providing
259K
173K
255K
338K
184K
Retail Trade
32K
28K
0K
61K
26K
Financial
10K
22K
7K
28K
7K
Business
51K
10K
72K
96K
40K
Temporary help
-8K
-14K
21K
31K
9K
Education/Health
54K
46K
54K
51K
28K
Leisure/Hospitality
66K
39K
56K
42K
55K
Government
7K
2K
10K
9K
3K
Average Workweek
34.6
34.6
34.6
34.6
34.6
Production Workweek
33.8
33.8
33.8
33.8
337
Factory Overtime
4.3
4.4
4.6
4.6
4.4
Aggregate Hours Index
0.2%
0.2%
0.3%
0.4%
0.5%
Avg Hourly Earnings
0.1%
0.5%
-0.2%
0.4%
0.2%
Household Survey
Household Survey
Civilian Unemp. Rate
5.5%
5.7%
5.6%
5.8%
5.8%
Civilian Labor Force
-178K
1051K
-273K
119K
416K
Civilian Employed
96K
759K
111K
4K
683K
Civilian Unemployed
-274K
291K
-383K
115K
-267K
Stocks and ETF’s bought over the past few weeks:
Notice the Flexibility is gone now as there is no longer positions in the VXX, SPXU or UDOW Both the VIX and SPXU protect against declines while the UDOW and various stocks reflect the long side. We have shown this table for the purpose of being both profitable and somewhat protected for much of the time while maintaining profitable long positions. Please check on the previous weekly market letters if there are questions. The UAL was stopped out at 66.60. AA was stopped out. We would like to be long Alcoa . We also bought the Diana Shipping at 6.60. The Scorpio Tankers were not ever filled as the market never got to our price.Try to buy a scale down on this move. We remain long Mosaic. We sold the Sell the Smith and Wesson on the opening last Monday. We remain long the XLV, the Health Care spider with the stop relatively close at 69. In addition we are long the DSX and Scorpio Shippers. ( All trading is hypothetical and intended as guidance)
Symbol
Name
Business Description
PE
P/S
MV mln
Price
Buy Limit
Stop Loss
Or sold
XLV
Health Care Spider
ETF
72.24
70
69sco
SWHC
Smith and Wesson Holding Corp
Firearms; Handguns Metal Processing
8.5
0.93
527.37
13.63
Sold on March 2nd
9.81
AA
Alcoa
Aluminum and Metals
14.30
0.8
17.53B
14.79
14.57 and again at
14 17
12.90sco
DSX
Diana Shipping
Dry Cargo Shipping
N/A
3.7
611
6.50
6.60
5.90
STNG
Scorpio Tankers
Oil Transportation
26
5.6
1.47B
8.64
7.46
7.48
UAL
United Cont Hld
Transportation
16
1.2
25.6B
66.67 stopped out at 66.60
46 original buy
63.45sco
VXX
VIX Volatility
Hedge Portfolio
27.62
30.97 stopped out @ 32.50
32.50sco
MOS
Mosaic Company
Agriculture Chemicals
18
2.04
17.9B
49.03
42.28
47.70
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Undervalued Small Cap Stocks
RMS Medical Systems, Inc ( REPR 0.40)*
Has doubled this year already and can double again .
RMS designs, markets, manufactures portable easy to operate infusion devices, including needles and tubing. It is easy to handle by patients. The Freedom 60 is being marketed in Europe as well as gaining a footing among home-care professionals in America. The RescueVac is used in ambulances and planes for emergency suction.
The Grilled Cheese Truck, Inc. (OTCQB: GRLD $ 3.95 )*
Cooks, sells, serves and promotes specialty grilled cheese sandwiches. Since 2009, The Grilled Cheese Truck has been serving areas of Southern California and Phoenix, AZ. David Danhi is an Executive Chef and began the company after spending thirty years in the food industry.
Grilled cheese is gaining popularity as a classic comfort food right along with pizza. The Grilled Cheese Truck is the only known gourmet food truck that has gone public and is the first and one of the largest gourmet grilled cheese truck in the U.S. The Company has 13 trucks and growing The Company has 13 trucks and its growth is legendary in L.A.
The Grilled Cheese Truck was one of the premier gourmet food trucks to appear on the L.A. scene 5 years ago. Chef Danhi wanted to capitalize on the growing demand for food trucks and is recognized for his food crafting and grill cheese creations, such as the signature sandwich, “Cheesy Mac and RIB”. The grilled cheese sandwiches are slowly toasted, buttered and crispy, touted as the “ultimate grilled cheese sandwich”.
January ends with the commencement of the Company trading on OTCQB and the introduction of new CEO, Al Hodges. Hodges brings 35 yrs. of operations, management and restaurant experience. He has a track record for success as a performance driven executive who implements successful business plans. From concept to expansion, Hodges has built a series of successful businesses and driven up company value. The Grilled Cheese Truck has become a widely recognized name and has
Enzo Biochem ( ENZ: NYSE: $ 2.98 )
We bought Enzo and got stopped out last week. I would be stubborn and try to buy it again basing my belief that the fundamentals will overcome the technical pattern. $ 3.02 is the 13-day moving average. If it can’t close above this number, we can’t be long the stock. F2015 (July) got off to a solid start with Q1 (Oct) results continuing to affirm our belief that Enzo’s core businesses are improving. Once again, revenue, gross profit and adjusted EBITDA were all better than projected, with revenue growth in both the clinical lab and life sciences businesses.
Gross margin in both businesses continued to improve, as the ongoing shift toward higher value molecular testing and efforts to improve operational efficiency continue to bolster margins. The company’s balance sheet remains on good footing while catalysts in the form of new products and litigation remain in play. Accordingly, we reiterate our Buy rating and $7 price target.
What keeps us excited about ENZ is (1) a clinical lab which is highly attractive to numerous strategic buyers; (2) a proprietary molecular diagnostic technology that could cut the cost of molecular testing by about 50%; and (3) IP litigation that could yield hundreds of millions of dollars over time
Market Strategies Cycles
The good news is:
The market is working off its overbought condition. Next week, on March 10, this bull market will be starting its seventh year. It arrives at this milestone by avoiding a 20% (widely accepted threshold for a decline to be called a bear market) or greater decline which was narrowly avoided in 2011 when S&P 500 dropped 19.4% from its April closing high to its October closing low.
So far the Dow has gained 12% from its low October 2014 and 160% from its low of 6,876 March 2009. The S&P 500 has gained 191% from the March 2009 lows and 13.7% up from the October 2014 lows, while the Nasdaq is up 19.7% from its low October 2014 and 264% from March 2009.
The current bull market has lasted longer and returned more than the historical averages across all three indices. However, there have been bull markets of longer duration but not the magnitude like today.
The negatives
Strength of the breadth indicators peaked about a year ago. Either they will recover or prices will tumble. If the breadth indicators recover, that recovery should begin soon because, seasonally, we are in the strongest period of the 4 year Presidential Cycle. If prices tumble, that is likely to happen sometime after July 1st, because that is the end of the seasonally strong period.
The chart below covers the past 3 years showing the Russell 2000 (R2K) in red and an Advance – Decline line (AD ADL) calculated from the component issues of the R2K in blue. This Advance – Decline line is a running total of daily declining issues subtracted from advancing issues.
Dashed vertical lines have been drawn on the 1st trading day of each month, those lines are red on the 1st trading day of the year.
The AD line peaked around the 1st of March last year and did not confirm the recent all time highs in the R2K.
The Current Posture
New highs declined a bit last week, but new lows remained at non- threatening levels.
The chart below covers the past 6 months showing the NASDAQ composite (OTC) in blue and a 40% trend (4 day EMA) of NASDAQ new highs divided by (new highs + new lows), OTC HL Ratio, in red. Dashed horizontal lines have been drawn at 10% levels for the indicator. The line is solid at the neutral 50% level.
OTC HL Ratio fell last week, but finished the week at a comfortably positive 65%.
As DJIA has pushed substantially above the high range of that chart (not because of a massive global economic boom or peace, but because of unprecedented easy monetary policy), I have again raised the floor on my initial forecast. The end game still is in play and the means to the end has only been elevated to account for this new easy money world. We still expect some tough sledding over the next few years in the market.
The low point of the economy and the bottom of the stock market now clearly appear to be behind us. However, volatility is increasing as is risk. Keep an eye on the VIX published every week on the “ Market Laboratory”. Geopolitical risk is increasing. The war on terror is still raging, a paradigm shifting technology has yet to emerge and deflation is emerging. 3D Printing and Fracking are not likely to change the world for the individual consumer like the car or the PC did. CPI has risen just 34% since 2001. We are still plagued by political dysfunction and the next administration is likely to have a rather tough go of it before we can get back to some real bipartisan leadership and policy initiatives.
The next chart is similar to the one above except it shows the S&P 500 (SPX) in red and NY HL Ratio, in blue, has been calculated from NYSE data.
NY HL Ratio also declined last week, closing at 67%.
Seasonality
Biotechnology seasonal strength ends in early March. Buy the BIS Ultra-Short Nasdaq Biotech ETF. A close above the 13 day MA is needed to confirm trading about 36. or Sell iShares NASDAQ Biotech (IBB)
Next week includes the first 5 trading days prior to the 2nd Friday of March during the 3rd year of the Presidential Cycle.
The tables below show the daily change, on a percentage basis for the 5 trading days prior to the 2nd Friday of March during the 3rd year of the Presidential Cycle.
OTC data covers the period from 1963 to 2014 while SPX data runs from 1953 through 2014. There are summaries for both the 3rd year of the Presidential Cycle and all years combined. Prior to 1953 the market traded 6 days a week so that data has been ignored.
Average returns for the coming week have been positive by all measures.
Saint Patrick’s Day is March’s sole recurring cultural event. Gains the day before Saint Patrick’s Day have proved to be greater than the day itself and the day after. Perhaps it’s the anticipation of the patron saint’s holiday that boosts the market and the distraction from the parade down Fifth Avenue that causes equity markets to languish. Or maybe it’s the fact that Saint Pat’s usually falls in historically bullish Triple-Witching Week.
Normally a decent performing market month, March performs even better in pre-election years (see Vital Statistics table below). In pre-election years March ranks: 4th best for DJIA, S&P 500, NASDAQ, Russell 1000 and Russell 2000 (January, April and December are better). Pre-election year March has been up 13 in a row for DJIA and 9 in a row for Russell 1000 & 2000. In fact, since inception in 1979, the Russell indices have a perfect, 9-for-9 winning record.
Whatever the case, since 1950, the S&P 500 posts an average gain of 0.22% on Saint Patrick’s Day (or the next trading day when it falls on a weekend), a gain of 0.11% the day after and the day before also averages a 0.22% advance. S&P 500 median values are 0.16% on the day before, 0.23% on Saint Patrick’s Day and 0.03% on the day after. In the nine years when St. Patrick’s Day falls on a Tuesday, like this year, since 1950, the day before (Monday) produced an average loss of 0.06%, while Tuesday advanced an average 0.77% and Wednesday 0.29%.
March (1950-2014)
DJI
SP500
NASDAQ
Russell 1K
Russell 2K
Rank
5
4
6
4
6
# Up
43
43
28
25
26
# Down
22
22
16
11
10
Average %
1.1
1.2
0.8
1.1
1.3
4-Year Presidential Election Cycle Performance by %
Post-Election
0.4
0.6
-0.3
0.8
1.2
Mid-Term
1.3
1.3
1.7
2.0
2.8
Pre-Election
2.2
2.1
3.5
2.4
3.2
Election
0.6
0.8
-1.6
-0.6
-2.1
Best & Worst March by %
Best
2000
7.8
2000
9.7
2009
10.9
2000
8.9
1979
9.7
Worst
1980
-9.0
1980
-10.2
1980
-17.1
1980
-11.5
1980
-18.5
March Weeks by %
Best
3/13/09
9.0
3/13/09
10.7
3/13/09
10.6
3/13/09
10.7
3/13/09
12.0
Worst
3/16/01
-7.7
3/6/09
-7.0
3/16/01
-7.9
3/6/09
-7.1
3/6/09
-9.8
March Days by %
Best
3/23/09
6.8
3/23/09
7.1
3/10/09
7.1
3/23/09
7.0
3/23/09
8.4
Worst
3/2/09
-4.2
3/2/09
-4.7
3/12/01
-6.3
3/2/09
-4.8
3/27/80
-6.6
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Where To Invest March 2015