4 Stocks we are looking at on a S&P pull back

 

As we stated in our last post when the S&P 500 was trading around 1,800 the market had yet hit an overbought level and no definitive sell signal has been signaled.  At this juncture our members have caught the last 420 S&P 500 points and we want to protect profits.  The last Buy signal was generated at 1,683 and we started to scale back at approaching overbought at 1,770.

• We have highlighted the below data throughout the year as the S&P 500 becomes overbought.  Many of you have seen this information before. Below are the most overbought markets in the last 19 years and how they performed 30 days later. As you can see, you will get some mean reversion, but the pull backs are shallow as the stronger the market the behavior of the bulls want to buy the dips.   As we mentioned yesterday, we would reduce more long exposure on rally’s as the overbought level is very close.  We still don’t expect a large pull back as you can reference below, the extremely strong and overbought markets have slow pullbacks.
  

  Dec 15, 1995 Counter Trend was -90.97
  Aug 5 1997 Counter trend was -74.19
  Jan 16 2004 was -72.28
  Feb 14 2007 counter trend was -69.03
  Jan 14 2010 counter tend was -74.52
  Feb 2 2011 counter trend was -72.53
  May 22 2012 counter trend was -74.08
  Current counter trend -70.50 

  Here is how the S&P 500 performed 30 days following these readings. 

  Dec 15, 1995 -3.13%
  Aug 5 1997 -2.20%
  Jan 16 2004 +1.00
  Feb 14 2007 counter trend was -3.15%
  Jan 14 2010 counter tend was -5.63%
  Feb 2 2011 counter trend was  -2.63%
  May 22 counter trend was -74.08 +1.4%

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4 Names we are watching closely. 

Reminder, most of these names are either overbought or extremely overbought.  So wait for a pull back.

MA – MasterCard is overbought.  Seems like an easy call now, but we first went to a Strong Buy Sept 2012 at $453.70 (see below).  With a broad S&P 500 5% to 7% pullback we will be looking to allocate capital to MA as long as the Rating Value holds above the S&P 500.  Of course all bets are off if MA has a negative earnings catalyst or is downgraded in our proprietary rating.

CAH – Cardinal Health is extremely overbought.  You will notice from the Chart below we went to a 5 or a Strong Buy back in May at $45.96.  With a broad S&P 500 5% to 7% pullback we will be looking to allocate capital to CAH.  Of course all bets are off if CAH has a negative earnings catalyst or is downgraded in our proprietary rating.

WYNN – Wynn Resorts is only approaching overbought.  You will notice from the Chart below we went to a 5 or a Strong Buy back in August at $140.  With a broad S&P 500 5% to 7% pullback we will be looking to allocate capital to WYNN as long as WYNN’s rating value stay above the S&P 500.  Of course all bets are off if WYNN has a negative earnings catalyst or is downgraded in our proprietary rating.

STZ – Constellation Brands is extremely overbought.  You will notice from the Chart below we went to a 5 or a Strong Buy back in August at $53.  With a broad S&P 500 5% to 7% pullback we will be looking to allocate capital to STZ as long as STZ’s rating value stay above the S&P 500.  Of course all bets are off if STZ has a negative earnings catalyst or is downgraded in our proprietary rating.

You will notice that the blue dotted line represents the rating value strength of STZ vs. the Orange line that represents the S&P 500 rating value Strength.  Currently, STZ strength is holding above the S&P 500.

 

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Past Performance is not indicative of future results.  This information is not investment advice and you should speak to a financial professional before investing.