Morning Matters: I Think I Can, I Think I Can

October 15th we saw a major low on the S&P 500 of 1820.66 put in before closing at 1862.49. Clearly, on that day someone, maybe the Plunge Protection Team or a huge whale of investor, stepped in and bid futures higher. Stocks have not looked back and the pain trade is higher. Why? Investors have too much cash and shorts sellers have increased bets. Therefore, both groups are struggling to keep up especially with the S&P 500.

The S&P 500 year to date is now up 11.83%. Meanwhile the Russell 2000 which represents small cap stocks is up 1.95%. That is a big divergence and the last time we saw it was 2011 when the S&P 500 closed up 0.00% and the Russell 2000 lost -5.45%. That spread was 5.45% and this spread 9.88%.

We have noted that since November of 2012, we have been in a really nice up cycle moving from 1343.35 to yesterday’s close at 2067.03. Within this up cycle, there have now been nine up and down moves of significance.

The October finished down move was the sharpest decline since we began the current up cycle. The down move was -7.40%. The next closest was -5.76% which happened twice. We have been in a new up cycle for a bit more than a month and the talk of a pullback continues to grow. A week later the question remains, “Should we be concerned?”

In less than a month, we have already moved more than the typical up move, 8.95%. The move is now 10.98%. So the conclusion is the easy money is in and now the challenge of the S&P 500 is to move above the best move seen at the same time last year, 11.59%. A big plus is that the S&P 500 has moved above its 200 and 50 day moving averages.

The red headed step child remains the Russell 2000. It is above the key moving averages noted in the paragraph above. However, it has now put in several closes above its September high of 1183.85. Two weeks ago the Russell 2000 closed at 1186.47. Yesterday it closed at 1186.94. The Russell 2000 has become like the little red engine, “I think I can, I think I can.” A breakout here would unleash the power within. Watch closely for some Thanksgiving magic instead of some turkey and stuffing.

The conclusion is we are more bullish here a week later but the models tell us this move still has the potential to be a head fake though each higher closes lowers that chance.

It should be noted the last two weeks we have noted that the S&P 400 Mid Cap index had yet to take out its September closing high as well, 1442.81. Today it closed at 1453.72.

The Madison Letter: Weekly Update

Since inception, our overall timing return is 76.49% versus 44.48% on the S&P 500 for excess return of 32.01%.

We added a buy on iShares Core S&P 500 Index Fund ETF (IVV) and took gains on Tuesday 9/2.

We began to offer a buy and sell strategy via our Madison Market Timing Indicator at the beginning of April of 2007. There are now 24 open and closed winning trades to 8 closed losing trades with our market timing results. We were left with one long position TRF from our original buys before launching with Uncommon Widsom Daily. This column replaces the Morning Matters on Fridays.

madison market timing

Portfolio Update

The S&P 500 has risen since our last update. The Nasdaq Composite rose as well. The portfolio is now 84% invested long, 0% short and 16% in cash, net long 84%. We are now at a value of 929.11% from 918.16% last Tuesday.

It appears for the time being that 2000 on the S&P 500 has become support and 2050 is resistance.

We have added the price target from the Alpha Intelligence Stock Scorecard into the weekly update. Names above price targets are highlighted in yellow. We will remain with these names as well until technical violations begin. ETFs recommendations can be found in The Madison Letter. In 2014, this will be updated each Friday with Market Crash Indicators. We added USO on the buy side last Friday.

Remember these returns are total returns with the average change for all winners and losers is 8.22% per idea. Our batting average of closed winners and losers is 73%. The portfolio is up 929.11% and from inception when it began at 0% in April of 2008. We began 2013 at a value of 478.60% so we had a very nice gain for 2013 ending at 732.40%. So far this year we are up 196.71 points or 26.85%. The performance on the Uncommon Wisdom Daily Portfolio Tracker is a bit higher due to dividends which they add in. We have never added in dividends so our weekly results are understated since 2008.

The Week Ahead

1.Geopolitical and Fiscal Events. Monday sees the Federal Reserve Chicago President Evans speak at 10:00 a.m. EST. Tuesday Federal Reserve Minneapolis President Kocherlakota speak at 1:30 p.m. EST. FOMC Minutes out Wednesday at 2:00 p.m. EST. Thursday sees Federal Reserve Governor Tarullo speak after the close at 8:30 p.m. EST. Friday sees Federal Reserve Cleveland President Mester and San Francisco President Williams speak.

2.Economic Releases. Releases of note this week include the weekly chain store sales, oil/gas numbers, mortgage applications and jobless claims include industrial production, PPI, housing starts, CPI, existing home sales, leading indicators and Philadelphia Fed Survey.

3.Earnings Releases. Notable releases include (in order of day’s reporting with Tuesday first and Friday last JD TSN HD MDT LOW TGT INTU GAP FL SIRO among others companies as we continue Q3 earnings.

Weekly Charts Updated

Each week we highlight charts below of the SP500, Russell 2000, NASDAQ Composite, UUP, EEM, TLT, HYG and LQD. The charts use the 50 day moving average slope indicator. When it is green we like the instrument we are tracking and when it is red we avoid the name/sector/asset class.

U.S. Equity indexes are all in the green. The S&P 500 is above 0 with the NASDAQ Composite. Meanwhile the Russell 2000 just broke above 0.

All charts are created from www.erlangerchartroom.com and if interested in using this indicator in Chart Room please feel free to send us an email by using the Contact Us section from the home page.

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Portfolio Update

The S&P 500 has risen since our last update. The Nasdaq Composite rose as well. The portfolio is now 84% invested long, 0% short and 16% in cash, net long 84%. We are now at a value of 918.16% from 898.55% last Tuesday.

It appears for the time being that 2000 on the S&P 500 has become support and 2050 is resistance.

We have added the price target from the Alpha Intelligence Stock Scorecard into the weekly update. Most stocks are below their price targets thanks to the pullback except four. ETFs recommendations can be found in The Madison Letter. In 2014, this will be updated each Friday with Market Crash Indicators.

Remember these returns are total returns with the average change for all winners and losers is 8.02% per idea. Our batting average of closed winners and losers is 72%. The portfolio is up 918.16% and from inception when it began at 0% in April of 2008. We began 2013 at a value of 478.60% so we had a very nice gain for 2013 ending at 732.40%. So far this year we are up 185.76 points or 25.36%. The performance on the Uncommon Wisdom Daily Portfolio Tracker is a bit higher due to dividends which they add in. We have never added in dividends so our weekly results are understated since 2008.

The Russell 2000 is now beating the S&P 500 on a daily basis.

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The Madison Letter: Weekly Update

We are invested on our overall Market Call. Since inception, our overall timing return is 74.63% versus 42.96% on the S&P 500 for excess return of 31.67%.

Stocks and indexes have settled into a nice uptrend.

There is now one open position, a buy on TRF. We added a buy on iShares Core S&P 500 Index Fund ETF (IVV) and took gains on Tuesday 9/2. Recent open and closed ideas are now in the second table.

We began to offer a buy and sell strategy via our Madison Market Timing Indicator at the beginning of April of 2007. There are now 24 open and closed winning trades to 8 closed losing trades with our market timing results. We were left with one long position TRF from our original buys before launching with Uncommon Widsom Daily. This column replaces the Morning Matters on Fridays.

madison market timiing

Weekly Charts Updated

Each week we highlight charts below of the SP500, Russell 2000, NASDAQ Composite, UUP, EEM, TLT, HYG and LQD. The charts use the 50 day moving average slope indicator. When it is green we like the instrument we are tracking and when it is red we avoid the name/sector/asset class.

U.S. Equity indexes are mixed now. The S&P 500 is above 0 with the NASDAQ Composite. Meanwhile the Russell 2000 is below 0 still. The U.S. Dollar remains positive and some bond funds are negative. EEM which is emerging markets remains below 0. HYG clicked into the red thirteen weeks ago and is still there. We replaced CFT with LQD and that has moved back to positive. Remember what matters is the slope of the 50 day moving average not the 50 day moving average itself.

All charts are created from www.erlangerchartroom.com and if interested in using this indicator in Chart Room please feel free to send us an email by using the Contact Us section from the home page.

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Portfolio Update

The S&P 500 has risen since our last update. The Nasdaq Composite rose as well. The portfolio is now 75% invested long, 0% short and 25% in cash, net long 75%. We are now at a value of 898.55% from 854.87% last Tuesday.

It appears for the time being that 2000 on the S&P 500 has become support and 2050 is resistance.

We have added the price target from the Alpha Intelligence Stock Scorecard into the weekly update. All stocks are below their price targets thanks to the pullback except two. Celgene is above its price target again and so is Bristol Myers thanks to a great run last week. We will hold Celgene and Bristol Myers until they hit the upper limit or we begin to see technical deterioration. ETFs recommendations can be found in The Madison Letter. In 2014, this will be updated each Friday with Market Crash Indicators.

Remember these returns are total returns with the average change for all winners and losers is 8.02% per idea. Our batting average of closed winners and losers is 70%. The portfolio is up 898.55% and from inception when it began at 0% in April of 2008. We began 2013 at a value of 478.60% so we had a very nice gain for 2013 ending at 732.40%. So far this year we are up 166.15 points or 22.68%. The performance on the Uncommon Wisdom Daily Portfolio Tracker is a bit higher due to dividends which they add in. We have never added in dividends so our weekly results are understated since 2008. In the past week, we have added two new buy ideas to our portfolio.

The Week Ahead

1. Geopolitical and Fiscal Events. Monday sees the Federal Reserve Dallas President Fisher speak on monetary policy as does Federal Reserve Chicago President Evans at 12:40 p.m. EST. Wednesday sees Federal Reserve Minneapolis President Kocherlakota and Federal Reserve Richmond President Lacker speak at 9:15 a.m. EST and 9:30 a.m. EST respectively followed by Federal Reserve Boston President Rosengren at 10:00 a.m. EST. Thursday sees Federal Reserve Chicago President Evans speak for the second time this week at 10:40 a.m. EST. Friday sees Federal Reserve Chairman Yellen speaks on monetary policy.

2.Economic Releases. Releases of note this week include the weekly chain store sales, oil/gas numbers, mortgage applications and jobless claims include construction spending, ISM Manufacturing, factory orders, nonfarm payrolls and unemployment rate along with ADP Payroll and Challenger Gray & Christmas Job Cuts.

3.Earnings Releases. Notable releases include (in order of day’s reporting with Tuesday first and Friday last AIG MRO BABA CVS QCOM TWX DIS AZN BAM MT among others companies as we continue Q3 earnings. See the earnings section.