Markets Mixed and Waiting for the Rebound

It was a mixed week for global stock markets. The major U.S. markets were broadly flat, with the Dow Jones up 0.12% and S&P 500 down 0.48%. In contrast, the tech-heavy Nasdaq tumbled 2.83%, while the MCSI Emerging Markets Index soared 4.52%.

It has been a very long time since I have seen such a divergence in performance among these markets.

The biggest gainer in your Bull Market Alert portfolio was your bet on Russia, with Gazprom (OGZPY) up 8.89%, as Ukraine fades from the news. (It’s too bad there were no options on this one!) Last week’s recommendation, GasLog Ltd. (GLOG), also hit a 52-week high before pulling back later in the week.

With the technology and healthcare sectors in the United States pulling back sharply, many of your current Bull Market Alert positions were hit hard. Google, Inc. (GOOG), Thermo Fisher Scientific, Inc. (TMO) and Grifols, S.A. (GRFS) all dropped below their 50-day moving averages and moved to a HOLD. They were joined by The Bank of Ireland (IRE).

From a purely technical perspective, all of your current positions are extremely oversold and due for a textbook bounce.

Just look at the chart for Google (GOOG):

The stock is oversold on both “slow stochastics” and the longer-term MACD indicator. It is trading below the lower end on its Bollinger bands. The stock ended slightly up on Friday, indicating that it may have turned. With the benefit of 20:20 hindsight, Friday may have been the perfect day to get back into the stock. Time will tell.

So what’s my verdict on the current pullback?

Because it has been restricted to a handful of momentum-driven sectors (the S&P 500 is only 1.4% off its recent high, while the Nasdaq is 5% off its peak), I’m betting the market’s recent action is not the “beginning of the end” of the bull market.

And even if it is “the end,” we typically see the market retrace 30% to 60% of its recent losses before resuming a downtrend. That will give us the opportunity to lighten up on some technology and healthcare-related bets and diversify your Bull Market Alert portfolio into other sectors and countries.

But until we get a more conformation of a rebound, this week is not the time to be opening new positions. I’ll be back next week with a new recommendation.

Portfolio Update

The Bank of Ireland (IRE) gave back 3.81% last week. Rating agency DBRS raised its rating on Ireland’s sovereign debt last week to “Stable.” IRE is beginning to trade sideways along its 50-day moving average (MA), readying for a rebound on its next leg higher. IRE moved just below the 50-day MA and is now a HOLD.

Thermo Fisher Scientific, Inc. (TMO) fell 3.58% over the past five trading days. The latest in a string of TMO upgrades came last week as Janney Capital Markets raised its TMO price target to $157.00, representing a whopping 32% premium above Friday’s close. TMO moved to a HOLD last week.

Open Joint Stock Company Gazprom (OGZPY) jumped 8.89%. This “comeback kid” pushed higher in your Bull Market Alert portfolio last week as my thesis of “Buy on the sound of cannons, sell on the sound of trumpets” appears to be coming to fruition. As tensions decrease in the Ukrainian region (or at least seem to be decreasing in the news coverage), expect further big gains in Gazprom. OGZPY is a BUY.

GasLog Ltd. (GLOG) lost 4.42% after pulling back from a new 52-week high early in the week. With natural gas moving in as the fuel of the future, GLOG is poised to profit from the exponentially growing need to transport this commodity. GLOG is a BUY.