- New Trades -

Editor's Note:

(February 01, 2015)

I looked at a lot of stocks this weekend. The market looks relatively fragile right now and quite a few stocks look downright ugly.

Investors seem to be having a hard time digesting all the negative data points. Europe and Asia are slowing down. Yes, it's true that Japan and now Europe have launched massive QE programs to try and stimulate their economies and avoid deflation. Unfortunately, it doesn't seem to be working yet in Japan and the ECB's program doesn't start until March. In the meantime deflation seems to be accelerating, especially in Europe. If that wasn't enough the new Greek government seems to have no intention of cooperating with its European creditors. We could see Greece leave the Eurozone this year.

We've been highlighting the rising dollar for a long time. Many of the S&P 500 companies do a lot of business overseas. The super sharp rally in the U.S. dollar is having a negative impact on U.S. profits. This trend will likely continue. The vast majority of corporations providing forward guidance have delivered bearish or disappointing guidance. That doesn't bode well.

We just saw Q4 GDP come in at +2.6% versus +4.9% in Q3. If companies are warning about the rest of 2015, what's going to happen to U.S. GDP? Are we headed for another recession? What happens when the Federal Reserve raises rates? If Greece leaves the Eurozone, who is next? These are some of the concerns that could be driving investor money into bonds instead of stocks.

The market could be setting up for another correction lower. I considered adding some buy-the-dip candidates to the watch list but the problem is that stocks almost always overshoot to the downside. Our recent Fedex (FDX) candidate is a good example. The good news it that another steep sell-off could provide us a much better entry point as we look toward the rest of 2015.

No new trades tonight.