U.S. Markets Break Out; International Stocks Continue Rally

U.S. stock markets salvaged another otherwise flat week, as the S&P 500 managed to break out to a new high yesterday.

For the week, the Dow Jones gained 0.38%, the S&P 500 rose 0.60% and the Nasdaq eked out a 1.13% gain. Continuing the stealth rally of 2017, the MSCI Emerging Markets Index jumped another 1.45%.

NVIDIA Corporation (NVDA) was the week’s big winner, rising 6.15%. George Soros’ top bet Liberty Broadband (LBRDK) powered ahead with a gain of 1.95%.

Your emerging market positions — the Cambria Global Value ETF (GVAL) and the WisdomTree Emerging Markets Small-Cap Div ETF (DGS) — continued their solid momentum, rising 1.91% and 1.85%, respectively. These positions are up 6.34% and 6.29% so far this year, respectively.

While other gains were much muted, 11 out of your 14 positions rose over the past week. In addition, 13 of your 14 remaining positions are trading above their 50-day moving averages and remain BUYs.

The big news of the week is that after an extremely tight trading range, the S&P 500 broke out to a new high yesterday, setting up a textbook bullish pattern.

Surprisingly, a look at the data shows that similar market breakouts from consolidations led to pullbacks of 3% or more almost every time.

Even as the technical outlook for the U.S. market looks mixed, the fundamental data looks better — and is improving.

So far, more than two-thirds of the S&P 500 companies have announced earnings that beat the consensus forecasts.

If this continues, it will mark the second quarter of earnings per share (EPS) improvement in U.S. stocks.

Throw in the prospect of lower tax rates and improving animal spirits under Trump, and it’s hard to see a sustained pullback in U.S. markets anytime soon.

That said, the investment story of 2017 may lie far from Wall Street.

I noted last week that the “sleeper” asset class of 2017 may turn out to be long the hated and ignored international stocks.

For example, both the iShares MSCI Brazil ETF (EWZ) and Global X MSCI Argentina ETF (ARGT) stock markets are already up by double-digit percentages — 12.15% and 12.15% — in 2017.

Finally, I wanted to highlight some good news coming up for you and all Alpha Investor Letter subscribers.

For now, let me just say that you can expect to see some significant changes in our format. I hope this will make your subscription even more valuable and compelling.

Portfolio Update

In column one, you will find the latest closing price of your position (“Last”).

In column two, you will find your position’s performance over the previous five trading days (“5D %Chg”). In column three, you will see whether your position is above or below its current 50-day moving average (“50D MA”).

A position is a BUY if it is trading above its 50-day moving average and is highlighted in GREEN.

A position is a HOLD if it has dropped below the 50-day moving average and is highlighted in RED.

Finally, in column four, I am including the performance of your positions over the past month (“1M %Chg”).

Click here to view the Portfolio Update table.
Sincerely,

Nicholas A. Vardy