Expecting the Bounce to Continue

As I expected, U.S. markets bounced strongly last week. The Dow Jones rose 0.66%, the S&P 500 recovered 1.22% and the NASDAQ jumped 2.15%. The MCSI Emerging Markets Index joined the recovery party, rising 1.83%.

Last week’s Bull Market Alert bet on a bounce in the Dow Jones, ProShares UltraPro Dow30 (UDOW), ended up a solid 2.48% in its first week in your portfolio. And if it weren’t for Friday’s scare on news surrounding the fighting between Ukraine and Russia, the week would have ended up even stronger.

The big gainers in your Bull Market Alert portfolio included Russia’s Mobile Telesystems OJSC (MBT), which jumped 6.14%, and The Bank of Ireland (IRE), which climbed 5.94%. Vipshop Holdings Limited (VIPS) also hit a 52-week high, gaining 5.33% as United Rentals, Inc. (URI) also rose 4.16%.

Bank of Ireland (IRE) rose above its 50-day moving average and is back to a BUY.

Last week, yet again, buyers stepped in just as the market looked like it was about to break down. Since Aug. 7, U.S. stocks have been up five out of seven days, and the benchmark S&P 500 has gained over 2%.

This V-shaped bottom has been typical for the market since November 2012. Statistically speaking, this type of bounce from a correction during an uptrend has boded well for the market in the weeks ahead.

Although the market is always subject to random “Black Swan” events like the sharp pullback in the Dow on Friday, I expect the market to hold up over the coming weeks.

The continued negative market sentiment I see in U.S. markets supports this view. The CNN “Fear & Greed Index” summary of market sentiment indicators I have discussed before stands at 13. Despite the rally in the market, this is hardly higher than it was a week ago. And as a contrarian indicator, this suggests more upside in the market in the weeks ahead.

Having reviewed the charts of your current Bull Market Alert holdings, I see that many of your positions are trading at a crucial technical juncture. Many positions are back to trading near their recent highs. But they aren’t quite there yet, as the example of the ProShares Ultra Real Estate (URE) shows.

A break through the July highs would suggest that the market is back on track for more short-term gains.

Until then, I want to hold off on any new Bull Market Alert recommendation for this week.

Portfolio Update

The Bank of Ireland (IRE) jumped 5.94% on positive upgrade news. Fitch upgraded a few of Ireland’s key debt ratings last week, pushing IRE’s shares higher. Fitch also set its Ireland outlook to “Stable.” IRE moved above its 50-day moving average (MA) to become a BUY.

ProShares Ultra Real Estate ETF (URE) added 3.14%. URE continued its rebound last week from a recent correction. In fact, URE has managed to regain all its lost ground in just the past two weeks, and it even hit a new 52-week high. URE is a BUY.

Mobile Telesystems OJSC (MBT) rose 6.14%. Although Russian/Ukrainian tensions continued last week, traders decided it was time to buy into the significant dip this Russian mobile telecom giant has taken over recent weeks. Standard & Poor’s last week affirmed its positive rating and outlook on another Russian telecom company, MegaFon, adding further fire to MBT’s stock price. MBT is scheduled to report earnings on Aug. 22, before markets open. Although MBT pushed above the 50-day MA last Thursday, it dipped slightly below on Friday to remain a HOLD.

Vipshop Holdings Limited (VIPS) gained 5.33% last week to hit a new 52-week high on a very positive earnings report. VIPS reported second quarter earnings per share (EPS) of $0.72 vs. an estimated $0.64, beating the Street by $0.08. This represents a whopping 260% jump in EPS from the same quarter last year. Revenue came in at $829.4 million vs. an estimated $791.55 million. And, to put a proverbial cherry on top, sales were up 136% year over year. VIPS is a BUY.

ProShares UltraPro Dow30 (UDOW) gained 2.48% over the past five trading days. This latest addition to your portfolio was a bet on the age-old “200-day moving average” bounce, and UDOW performed exactly as predicted. Although the Dow Jones gained a fair 0.66% last week, this 3x-leveraged bet added a better-than-triple 2.48%. UDOW is technically below its 50-day MA due to the recent negative market action; however, UDOW is a BUY in your Bull Market Alert portfolio.