Health-care stocks and consumer staples shares leading the rally also signal the advance in the S&P 500 may slow, he said.
“You don’t usually see defensive groups leading the market to all-time highs,” Kleintop said. “What that suggests is that the rally may be getting a little tired. We might see something like we’ve seen in last few years -- a pullback starting in April.”
In the four years since the bull market started, the S&P 500 nearly entered a bear market twice, losing 16 percent over two months in 2010 and 19.4 percent in about five months in 2011. Both declines began in April. It recovered both times as the Fed committed more quantitative easing to boost the economy.
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"An above average CAPE is not bad, if one expects that earnings will be improving in the near future. That is, stock prices may be high in anticipation of higher corporate earnings and, consequently, the CAPE will fall as these earnings catch up with the higher stock prices. This is the "good" scenario.
The "not-so-good" scenario is when stock prices increase, yet, earnings do not rise to support the higher stock prices. The question is…is this situation we are now in?" Click here to read the full article "The S&P 500 may be trading at levels that would mark a new all-time high right now, but don't tell that to individual investors. According to the American Association of Individual Investors, bullish sentiment actually declined modestly this week from 38.94% down to 38.40%"
Click here to read the full article "Much has been made of the strong rally the market has experienced so far this year, but as we have mentioned numerous times, it's important to remember that last year at this time the market was up even more. On this trading day last year, the S&P 500 was up 11.09% year to date. As of this morning, the S&P 500 was up 8.99% year to date in 2013"
Click here to read the full article "If stocks do indeed peak in April (if not sooner) and sell off over the next few months, where exactly is the money likely to go that is flowing out of the stock market? In other words, how can investors seize the opportunity offered by stock investors "selling in April and going away"? Recent history since the outbreak of the financial crisis several years ago leads to two distinct answers."
Click here to read the full article "The more I think about it, the more I want to conclude that when (not if) the currently very manageable Goldilocks situation invariably goes astray, it will do so not as a result of equity-market weakness, but in reaction to excessive equity-market strength ."
Click here to read the full article "Since March 2009, according to Ford, the average junk stock has gained 272%, versus 171% for the typical high-quality stock. And there is no recent evidence that this trend has reversed: Over the past three months, for example, junk has increased its lead, gaining 12.1% versus 9.6% for quality.
To appreciate just how much the Fed’s policies have been responsible for this pattern, consider how returns since March 2009 have depended on whether the Fed increased or decreased its monetary stimulus. When the Fed’s quantitative-easing programs were fully in force, junk handily won — turning in an average monthly gain of 5.6%, versus 3.4% for quality. During all other months, the average junk stock actually incurred a slight loss, versus a 0.7% monthly gain for the average quality stock. This contrast offers a glimpse into how the stock market is likely to behave when the Fed finally does bring quantitative easing to an end and begins to increase interest rates. Not only will the market as a whole face stiffer headwinds, but previously highflying junk stocks could be big casualties. Banking stocks, and the financial sector generally, could be particularly hard hit." Click here to read the full article "Another, slightly less complicated way of looking at it is that bull markets go for as long as they go and for whatever reason. It is the terminal valuation that determines the degree of damage done in the subsequent bear market. Value must be reset, and the higher the starting point, the worse the decline when the bull driver ends."
Click here to read the full article "The SPY May $155 straddle—which entails buying puts and calls with strike prices equal to the price of the associated security—was so expensive that the stock market would have to rise or fall some 7% or more for the straddle to be profitable.
When a straddle is too expensive, or you want to risk less money, strangles are usually a viable alternative. The strangle entails buying puts and calls with strike prices above and below the associated security's price. Well, the strangle didn't offer big savings compared with the straddle. This shows that the options market expects stocks to make a sharp move, up or down, during earnings season—and the move is priced into both put and call prices." Click here to read the full article "At some point, the massive disconnect that has been created between Dr. Copper and the economy versus Mr. Market will have to reconverge. Either Dr. Copper and the economy will have to rise up to meet Mr. Market, or Mr. Market will have to fall to meet Dr. Copper and the economy."
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It's always a good idea to keep some good articles, at least I think they are good for reference, so I can go back and read them later.
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