The popular averages quickly returned to the upside Friday with the Dow Jones Industrial
Average and S&P 500 both resuming the setting of record closing highs. Encouraging
reports were received regarding the Leading Economic Indicators and consumer sentiment.
On Friday Tesla Motors (TSLA -0.8%) pulled back slightly from Thursday’s record
high. Its subsequent offering of 3.4 million shares was well received by money managers
late Thursday after being priced at essentially Thursday’s closing price which was
up 8.7% that day. The additional offering of $600 million in convertible notes was
also well supported. In both cases the amount sold was greater than originally offered.
Some dilution due to the offering plus the expiration of options may have kept a
lid on the share price Friday. Tesla’s builder of Supercharger stations SolarCity
(SCTY +26.1%) exploded upward on Friday to easily achieve record intra-day and closing
highs. On Thursday it gained 11% after announcing a lease financing agreement from
Goldman Sachs to fund more than $500 million in solar power projects. A Supercharger
announcement is expected next week, and investors may now be anticipating a good
one after Tesla’s increased cash position due to its shelf offerings. See videos
related to these two companies down below. Since Easter both stocks have well more
than doubled with TSLA adding 141% and SCTY 138%.
Above is my three-month chart of the S&P 500 exchange traded fund (SPY). As readers
will recall I switched back to bullish in mid-November as the market appeared washed
out on high volume. A strong six-month uptrend has followed the early November slide.
The final thrust to that bottom was inspired by money managers and market newsletter
writers disgusted by the election results and predicting disaster would follow. I
tried to maintain a more level head. There have been a few bumps in the SPY’s otherwise
upward bound road since then due to congressional indecision and concern about Cyprus.
Less than stellar economic data provided more pressure during mid-Apirl. Fourth quarter
earnings reports have generally been good and have had significant influence on the
market averages. For the rest of this month we’ll hear mainly from retailers.
Bullish sentiment is still not strong enough to signify a long term top. Too many
investors remain outside the stock market, including retiring baby boomers frustrated
by low interest rates. Meanwhile, the Fed is still our friend as long as it keeps
creating new money. The SPY slightly pierced its 50-day moving average on April 18th
then bounced back above leading to a forceful upmove. That’s an indication of continued
The old adage is to “sell in May and go away.” That’s because May initiates the
six-calendar-month period that is historically the weakest for the market. The saying
has been spread more widely this year due to the exponential growth of social media.
That may have explained some of the selling on the first day of May. I’m staying
the course until the technical and fundamental signs indicate otherwise. In any event,
the real trick is to be in the right stocks no matter what the season. Look for companies
providing necessary new products or services with innovative technology and sound
business plans adapted to the 21st century. That’s where the next fortunes will be
DISCLAIMER: Our commentaries are provided as general information and not investment
recommendations. You are responsible for your own investment decisions. Our opinions
are based on historical research and data believed to be reliable. There is no guarantee
that results will be profitable. We are not responsible for errors or omissions.
We may hold positions in vehicles that are mentioned.