Boring Stocks May be the Way to Go

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On Thursday, the market snapped a two-day losing streak, but with lighter-than-average volume and a very narrow trading range. Stocks opened up and held those gains, but there was no enthusiasm to break into new high ground despite favorable news regarding the ECB’s stimulus plan.

Today’s jobs report seemed to be the focus of Thursday’s trading. Economists estimate U.S. employers added 240,000 jobs in February, and the unemployment rate is expected to fall to 5.6%.

Despite remarks from some market mavens that the technology sector is overpriced, perhaps even more so than during the dot-com bubble, the tech-heavy Nasdaq rose 0.3%.

However, fear appears to have driven some investors into more defensive areas. Utilities, up 0.8%, led the S&P sectors, while health care gained 0.4% and consumer staples rose 0.3%.

The health care sector was assisted by a 2.2% jump in biotech. This was largely the result of the acquisition of Pharmacyclics, Inc. (NASDAQ:PCYC) by AbbVie Inc (NYSE:ABBV). PCYC popped 10.3% on the news.

Crude oil for April delivery fell 1.5% to $50.76 a barrel, and Brent crude fell 0.1% to $60.48 a barrel.

Bonds rallied in both the United States and Europe. The yield on the U.S. 10-year Treasury note fell 1 basis point to 2.11%. The U.S. dollar rose, with the euro dropping under $1.10 for the first time in 11 years.

At Thursday’s close, the Dow Jones Industrial Average rose 39 points to 18,136, the S&P 500 was up 3 points at 2,101, the Nasdaq gained 16 points at 4,983, and the Russell 2000 was up 4 points at 1,234.

The NYSE’s primary market traded 684 million shares with total volume of 3.1 billion. The Nasdaq crossed 1.7 billion shares. On the Big Board, advancers outpaced decliners by 1.2-to-1, and on the Nasdaq, advancers led by 1.4-to-1.

VIX Chart
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Despite talk of “high fear” and “overextension” of stock prices, especially in the tech sector, VOLATILITY S&P 500 (VIX) confirms that complacency abounds.

This is unusual after a run to new highs, unless traders are not acting on their instinct to protect their positions by purchasing puts. This is an unusually quiet market with Thursday registering the second lowest volume of the year.

IWM Chart
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Chart Key

iShares Russell 2000 Index (ETF) (NYSEARCA:IWM) shows a low-volume pullback from the recent high of March 2. A break of the support line at $121 would most likely lead to a test of the ETF’s 50-day moving average at $119.

Conclusion

The talk of overpriced technology stocks may be the result of their steady advance in price. However, while prices have increased, so has value, in the form of an acceleration in earnings.

Nevertheless, my scan of literally thousands of stocks resulted in few techs that appeared to be “good buys” from a chartist’s point of view. But there are some excellent prospects among the blue chips.

I’m in the minority in this view, but I’ve concluded that more often than not my analysis is accurate when I’m recommending stocks that no one else wants. For example, on Wednesday, I focused on the Utilities SPDR (ETF) (NYSEARCA:XLU). For the first time in my remembrance, there was not a single comment from readers on the Daily Market Outlook and just one on the Trade of the Day.

This “no response” may be because I am now cautious with the high techs and bullish on big-cap, “boring” stocks like utilities. It will be interesting to see if there is a response to today’s Trade of the Day on United States Steel Corporation (NYSE:X).

Raymond James’ Jeff Saut remarked that fear is now rampant. He pointed to a noticeable increase in the number of Google searches for “stock market top” — the most since the fall of 2008, in fact. But of even more interest was Saut’s observation that the market’s actual top occurred one year prior to the spike in inquiries, which actually occurred closer to the market’s bottom than top.

“Never sell a slow market” — good advice for long-term investors, but not necessarily traders.

Today’s Trading Landscape

To see a list of the companies reporting earnings today, click here.

For a list of this week’s economic reports due out, click here.


Article printed from InvestorPlace Media, https://investorplace.com/2015/03/daily-market-outlook-boring-stocks-may-way-go/.

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