SET Portfolio Update February 2015

It’s been an interesting start to the year for US stocks.

The S&P 500 finished the month without making a new high.  And each of the rallies this year led to lower highs going back to the December 29th high.

This has clearly been a period of consolidation for large cap US stocks.  However, it’s important to note that the correction is taking place within the price channel of the long term uptrend.

In other words, the period of weakness hasn’t done any major damage to the bullish long term uptrend.

Nevertheless, the weakness for US stocks has been widespread.  Out of the nine sectors, only utilities and healthcare are up year-to-date.

One of the main reasons for the weakness in stocks has been an uptick in uncertainty. That uncertainty has been created in large part to the drop in oil prices and volatility in the global currency markets.

Another reason for the weakness in US stocks has been 2015 earnings estimates.

The energy sector is leading the way in downward earnings projections as oil prices fall below $50 per barrel.  But weaker than expected earnings forecasts have been seen in companies in every sector.

One thing that has benefited from the drop in oil prices has been consumer sentiment.  The University of Michigan’s Survey of Consumers reached an 11 year high last month.

The way I see it, this period of weakness for US stocks won’t last long.

We’ve seen this time and time again from corporate America.  The weaker than expected earnings forecast will lead to many better-than-expected earnings when companies actually report earnings.

Now, onto the updates…

. . . . Guggenheim S&P Equal Weight Consumer Staples ETF (RHS) – Buy

RHS is the latest addition to our portfolio.  It quickly rallied up to our $108.00 buy up to price but has since given back most of those gains as the market has pulled back over the last week.  The uptick in consumer confidence was especially strong for those that make under $75,000 per year.  An uptick in spending from this group should have a very positive impact on consumer staples.  Buy RHS below $108.00.  The price target is $122.00.

. . . . Market Vectors Gaming ETF (BJK) – Buy

The tide for gaming companies hasn’t turned yet.  But rising consumer confidence in China should benefit Macau.  Buy BJK below $41.00.  The price target is $55.00.

. . . . Market Vectors Semiconductor ETF (SMH) – Buy

SMH has been moving in lockstep with the overall market.  However, semiconductor stocks have tremendous upside in the current market environment.  They’ll likely find themselves leading the next surge higher.  Buy SMH below $55.00.  The price target is $71.00.

. . . . Market Vectors Retail ETF (RTH) – Hold

Retail stocks are performing well as oil prices fall and consumer confidence surges. Continue holding… the price target for RTH is $75.00.

. . . . First Trust NASDAQ-100 Technology Sector Index Fund (QTEC) – Hold

QTEC is in a great position to surge higher after starting the year slowly.  Large cap technology is being led higher by Apple (AAPL) after the company posted record profits on strong sales of the iPhone 6.  The price target for QTEC is $50.00.

. . . . First Trust Health Care Alpha Dex Fund (FXH) – Hold

Healthcare stocks are one of the few bright spots for US stocks this year.  FXH reached a new high of $62.94 last week.  My target for FXH is $65.00.

. . . . Global X Social Media Index ETF (SOCL) – Buy

SOCL is another bright spot this year.  It’s up 1.6% this year.  But it’s still well off the highs from 2014.  Nevertheless, the solid start to the year is a good sign for this growth industry that had fallen out of favor with investors.  Buy SOCL up to $20.00.

. . . . Financial Select Sector SPDR (XLF) – Hold

XLF is being weighed down by the drop in oil prices.  There have been a lot of loans made to oil and gas companies based on oil prices being between $50 and $100 per barrel.  Now that oil is below $50, some of these loans won’t be able to be repaid.  Investors are clearly anticipating a downturn in credit quality for the first time in years.  My price target for XLF is $29.00.  Continue holding for bigger gains.

. . . . Guggenheim Solar (TAN) – Hold

Solar stocks have been on the upswing over the last week.  The tide of negative investor sentiment due to growth expectations and falling oil prices is finally starting to subside. There could be a big rally just around the corner… continue holding.

. . . . PowerShares Dynamic Leisure and Entertainment (PEJ) – Hold

. . . . PowerShares Dynamic Media Portfolio (PBS) – Hold

The uptick in consumer confidence to an 11 year high is a great sign for PEJ and PBS. These ETFs have established new uptrends and appear to be poised to break out to new highs in short order.  My price target for PEJ is $41.00.  My price target for PBS is $30.00. Continue holding.

Action To Take

• None at this time.

 

Category: SET Portfolio Updates