TriggerPoint Research

Markets continue to have a bid underneath them as volatility has seemingly left the building.  As it currently stands, volatility has reached multi-year lows (~12.5 1/18/2013) according to the S&P 500 VIX Index as investors pour money into the market. As a matter of fact, we haven’t witnessed levels this low since mid-2007 when complacency of the ensuing financial disaster was on the horizon. We are far from suggesting that this may be a similar situation, but it does call into context the lack of fear in the marketplace.

These extremely low levels indicate that the Federal Reserve has done its job in creating liquidity in the marketplace. With great liquidity comes great consequence. It means investors are forced to take on greater risks in order to achieve yield or return on their investments than they normally would. Retirees would typically be living off of income from their bond portfolios, CDs or even savings accounts as these assets have been relatively safe in protecting principal while providing around a 5% yield. Today, you would be lucky to find a money market account (MMA) or short-term CD earning more than 1% as we have observed rates of 0.05% – 0.5%.

In 2013 alone, we have witnessed extreme buying pressure across domestic indices.  Below is a table showing the various indices and their performance:

In this edition of The Rundown, we continue to look at the more recent ALERTS! and their various performance measures as well as highlighting some of the newest ALERTS! that have recently triggered.

Below is a table showing the ALERTS! that are still active.

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ALERTS! INTRO VIDEO

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In yesterday’s post, we discussed the retail sales numbers and how we were beginning to see quite a bit of weakness entering the department stores and clothing brands.  Our suspicions were proven founded as earnings from several retailers and more specifically, JC Penney (JCP) and Abercrombie and Fitch (ANF) would come in worse than expectations.  We saw JCP finish on the lows of the day down almost 20% and we witnessed ANF slip to -13.5% to finish off the trading session.

The hype from JC Penney’s (JCP) new marketing director straight from Apple has seemed to worn off over the past 3 months as the stock price has declined from a high of about $42 to about $33.  Since this is a seasonal trade, EPS expectations are pretty slim and analysts are looking for a loss of $0.08 per share on sales of $3.42 Billion.

JCP is currently in a “Fast Zone” to the downside and if it were to break down below $32.50, there could be a potential move to $31.50 then further down to $29.50.  Very rarely has JCP missed on EPS or Sales, so be sure to pay attention to any miss and watch downside protection.  While downside seems to be more apparent considering the recent trend, there is some upside.  If there were to be a break above $34.50 look for upside up to $36.00.  If earnings were to be a blowout, and the stock moves above 36.20ish, there is a large hole up to $38.30 then on to $40.00.

See attached report for further detail.