Where have all of the AAII bulls gone? Europe and emerging markets apparently...

Despite the S&P500 being only 24 points from all time highs, AAII investor bullish sentiment has reached unusually low levels.  Fund flow data indicates that over the past 2 weeks a lot of money has left US equity ETFs and flowed into developed international and emerging market ETFs.  The Fast Pitch blog indicated recently that fund manager US equity allocation is currently at a 9 year low.

From a contrarian perspective one must view this as positive.  With cash balances of the top companies in the S&P500 at record levels, corporate tax reform on the horizon combined with sound corporate and economic fundamentals, it makes sense to be a buyer of US equities.  I think the majority of investors are being distracted by the negative media and the recent Trump political drama.

Internet Stocks To Lead NASDAQ To New Highs In 2015

The internet stocks are showing relative price strength after a year of price consolidation and will likely lead the NASDAQ to new highs in 2015.  The largest companies by market cap in the Dow Jones Internet Composite index are listed above.  Notice that Facebook (FB) and Google (GOOGL & GOOG) make up approximately 20% of the index alone.  Google has been moving sideways for the majority of 2014 and I think is modestly valued relative to other technology companies.  FDN is the largest ETF that tracks this index.

Biotechnology & Health Care Stocks & ETFs Continue To Lead The Stock Market Higher

Biotechnology and health care stocks and ETFs continue to lead the market.  This is becoming a dominant theme within the broad technology sector.  It is likely that health care and biotechnology stocks continue to grow in relative market cap weight in the major US indices (i.e. NASDAQ 100 & S&P 500).

Year End Mid Term Election Year Rally Underway. Small & Mid Cap Stocks Leading.

The strong mid-term election year end rally is underway.  Small-cap (IWM) and mid-cap (MDY) ETFs have taken the lead.

Biotechnology ETFs post new 52 week highs

Small Cap Stocks To Lead Long Term

Everyone knows that small cap stocks are the canary-in-the-coal mine for the economy.  One can assess the strength of the overall global economy based on the performance of small cap stocks relative to large cap stocks.  They tend to outperform when business conditions are good (i.e. consumers are spending, fear is moderate, lenders are lending, interest rates are low, etc.)  During bear markets, small cap stocks underperform.  During bull markets, they outperform.  We are currently witnessing the beginning of long term small cap stock outperformance.

From a technical perspective, IWM which tracks the Russell 2000 small cap index, has broken out of a large ascending triangle pattern and is on its way to new highs.  We're just getting started...

Facebook Up 17% After Hours, LinkedIn Trend Is Up, FDN Is The Best Way To Play Them Both

Facebook finally posted earnings results that beat estimates and will be rewarded by the market tomorrow.  However, its social networking cousin, LinkedIn, seems to be the better play.

Despite the fact LinkedIn is a fraction of Facebook's size,  it has far more predictable earnings and revenue growth data and is likely to continue its smooth growth in the future as it continues to implement more revenue generating service offerings to its members.

It is extremely hard to determine the likelihood of success of a given social network or high P/E multiple internet company.  FDN is an ETF that tracks the Dow Jones Internet Composite Index. Although it has a more modest MER of 0.60%, it is worth every penny over the long term.

IBB vs. FBT Extreme Biotechnology ETFs

If you can stomach extreme volatility (ie. a near 50% correction like in 2011), FBT by First Trust is the ultra biotechnology ETF.  They're also the creators of FDN, the Dow Jones Internet Index ETF which is also on fire (it's 10% GOOG).

Market Finishes Strong

The market continued to build on higher volume today straight into the finish. Small caps, transports, materials and energy were in the lead with defensive sectors lagging the market. Today was a positive day all around.

Several emerging market ETFs made great gains on high volume. The iShares MSCI Malaysia Index (EWM) posted new 52-week highs.

Manulife

Before the financial crisis, the investment community used to use words like "conservative" and "value" to describe the financial services sector, which includes the big banks and insurance companies. I think it is now appropriate that words such as "volatile", "speculative" and "casino-like" be used in financial service sector mutual fund and ETF prospectuses.

Fortunately, I've never been really interested in the financial services sector due to the fact that I'm more of a younger and growth oriented investor. I feel sorry for all of the yield chasing conservative investors who included companies like Manulife in their portfolio thinking it was a stable long term "conservative" investment.

Below is the chart of a company whose sector is often described as "volatile" or "speculative".

Value Line Arithmetic Index

According to Wikipedia, the Value Line Composite Index is composed of all of the companies that are included in the Value Line Investment Survey. There are currently 1,626 companies included in the index that are publicly listed on the following exchanges:
American Stock Exchange - 8 companies
NASDAQ - 511 companies
New York Stock Exchange - 1,087 companies
Toronto Stock Exchange - 20 companies

I can't find an ETF that tracks this index. Let me know if you can.

Solar Energy

"If we could harness only 0.03% of the sun's light, we would have more than enough energy to power the entire planet"

This is a remarkable statement made by more than one scientist on the solar energy debate. Although solar energy is far more expensive to produce than other sources currently, we could be close to a tipping point where it becomes much more competitive and efficient.

This ETF is obviously not pricing in a solar energy revolution. In fact, solar energy stocks were crushed along with all energy stocks during the 2008 market crash. Currently, solar ETFs seem to be trading in a similar fashion to other energy related ETFs. The Market Vectors Solar ETF (KWT) is a relatively new ETF with little price history. Its major holdings are listed below.

TOP 10 HOLDINGS (67.25% OF TOTAL ASSETS)

Company
Symbol
% Assets
Canadian Solar Inc. CSIQ 4.18
First Solar, Inc. FSLR 9.64
MEMC Electronic Materials, Inc. WFR 10.16
Q-CELLS QCE.BE 4.48
RENEWABLE ENERGY REC.OL 11.45
SOLARWORLD SWV.BE 4.14
SunPower Corporation SPWRA 4.45
Suntech Power Holdings Co., LTD STP 9.47
Trina Solar Limited Sponsored A TSL 4.82
Yingli Green Energy Holding Com YGE 4.46

If solar energy is to become the dominant energy source in the not-so-distant future, solar energy related stocks should start to be priced less like energy stocks and more like technology stocks. I anticipate that traditional energy stocks will lag the market for some time. Solar energy companies should eventually prove to be market leaders sometime in the future.

Brazil

The EWZ has been one of the leading ETFs in terms of performance for the past several years. After the worst recession in the US in 70 years, this ETF is almost retesting its old highs. A snapshot of a growing economy.