Established in 1957, the S&P 500, also known as the Standard and Poor’s 500 Index, is a capitalization-weighted index of 500 large-cap common stocks. Capitalization-weighted means that the companies with largest stock market capitalization have the greatest impact on the value of the index. The S&P 500 is the second most widely followed stock market index in America after the Dow Jones Industrial Average.
If you invested all of your money in the stock market, you would be exposed to extraordinary risk of a market retrenchment.
Of course, you could also make a lot of money, especially with how well things are going in the current bullish stock market that continues to somewhat defy gravity.
Yet this is also the time you need to take some extra precaution and think about where you are at and what your end goal is in the stock market.
You don’t want to risk your entire investing capital on the stock market, in spite of any temptation to do so. This is when you have to fight against the greed that might be in you—the greed that’s in most of us—and it won’t be easy.
Remember what happened after each of the multiyear peaks in the stock market over the past decades, when the stocks retrenched. I’m not saying the stock market is at a peak. In fact, the bulls look like they are in full control and heading higher on the chart.
You just need to be on top of things, and don’t let greed ravage your sensibility toward the stock market.
Chasing dreams is one thing, but being prudent is another.
I’m not going to say you should run for the exit, but you need to be aware of where your capital is being invested and understand the associated risk factors.
The reality is that a sound investment strategy means understanding asset allocation and diversification to increase the risk and return of your portfolio.
By asset allocation, I refer to the asset mix of your portfolio … Read More
A year ago, I was able to take a close look at a cool-looking electric-powered sports car. I even got to sit in it. I noticed that it was not made by a manufacturer that I had recognized—it was built by Tesla Motors, Inc. (NASDAQ/TSLA), but I really didn’t give it a second thought.
Well I wish I had now, as Tesla is seeing its shares supercharge on the price chart, up 70% in the first few weeks of May and 167% so far in 2013, based on my stock analysis. Tesla is up a sizzling 198% over the past 52 weeks compared to the S&P 500’s 23% increase.
My stock analysis suggests that the maker of the sharp-looking electric sports car has really shocked the stock market with its superlative price appreciation. Who would have known?
Chart courtesy of www.StockCharts.com
I thought Tesla was interesting and gimmicky in some ways, but never in my wildest imagination did I expect the stock to surge as much as it has.
According to my stock analysis, you can thank the short-sellers for running to the exits and unloading their positions in a classic short squeeze. At the end of April, there were 27.5 million shares of Tesla shorted. The share price was $53.99. Fast-forward 10 sessions, and the price has surged to over $90.00.
Now you can’t blame short-covering for all of the increase in the share price. Tesla did deliver some awesome numbers that tore apart Wall Street’s estimates, according to my stock analysis.
In the first quarter, Tesla sold 4,900 vehicles. That’s it. By comparison, General Motors Company (NYSE/GM) sold … Read More
The Ben Bernanke-driven stock market rally continues in full force and is unabated, but I really question the rate of the advance and believe stocks remain overextended at this juncture.
The S&P 500 made another record high above 1,600 last Friday, but making that move to above the magical level came slowly and cautiously, which makes me feel somewhat uneasy.
The breakout—above the multiyear top near 1,565—is positive, as shown on the chart below, but the move was associated with light volume, which suggests a bearish divergence, based on my technical analysis.
Taking a look at the blue ovals on the stock market chart below, you will notice the possible pullback that has occurred after every six-month rally from November to April over the past three years from 2010 to 2012.
Whether we will see another retrenchment in the stock market this year is unknown, but based on the rate of the gains so far, I feel there is an above-average likelihood of this happening.
Featured below is a stock chart of the S&P 500 Index:
Chart courtesy of www.StockCharts.com
While the stock market continues to show upside potential, I think you should continue to ride the wave upward; however, you also need to be aware of the risk and the reality that the stock market could plummet on bad news, considering how high the gains have been so early in 2013.
Moreover, the Dow Jones Transportation Average is also offering up a red flag on the upward move in the Dow Jones Industrial Average.
The chart below shows that the industrials (as indicated by the green line in the … Read More
The latest data on job creation by the Bureau of Labor Statistics (BLS) are interesting for several reasons. While there are some glimmers of hope, there is still much more work that needs to be done.
For April, job creation improved by 165,000, with the 12-month average now at 169,000 per month. The long-term unemployed level continues to be high, although it is decreasing. Currently, there are 4.4 million long-term unemployed, a decrease of 258,000 during the month of April. This lowered the percentage of long-term unemployed to 37.4% of the overall unemployed, down 2.2% for the month. Another important metric is the participation rate, which remained at 63.3% and is at historically low levels.
Clearly, economic growth needs to accelerate for job creation to continue moving upward. The participation rate remains quite low, and the large number of long-term unemployed is stubbornly high.
The market reacted positively, not only from the headline number, but also the extremely large positive revisions to the previous months of job creation data. While economic growth appears to be slowing, jobs data were much stronger than previously reported, with February and March job creation data revised upward by 64,000 and 50,000, respectively, from the initially reported data.
Do these data indicate any sectors worth investing in?
Yes; as the healthcare industry continues with a steady pace of job creation, with 19,000 newly employed in April, this brings the 12-month average for job creation in the healthcare industry to 24,000 per month. As an investor, with economic growth still relatively anemic nationwide, it appears the healthcare industry will continue on its upward trajectory.
The new … Read More