Equity Rally Accelerates; New Buying Opportunities

Both the Dow Jones Industrial Average and the S&P 500 indexes closed at record high levels on Friday. The catalyst was the announcement by the Bank of Japan to substantially increase its Quantitative Easing program, which was expanded to include the purchase of equity and real estate investment trust assets.

As markets now show signs of stabilization, in my view, two Fidelity mutual funds stand out as new investment opportunities: the Select Wireless Communications Fund (FWRLX) and the Low Priced Stock Fund (FLPSX). Both funds pulled back during the market correction, but have moved back above their respective moving averages and their charts show a bullish price pattern.

fwrlx

flpsx

Read about investment strategies involving these funds at FidelitySignal.com

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The Dow Jones Industrial Average Index cannot Hold the 17,000 Level; Biotech Sector Shows Signs of a Possible Correction; Real Estate Stocks may be Ready for a New Rally

Ahead of the July 4th holiday, the Dow Jones Industrial Average briefly reached the all-time high 17,000 level, but was not able to hold it this week. The chart below shows that the Dow is still in a bullish uptrend, but what makes us concerned is the more severe sell-off in market leading sectors, such as biotechnology.

We are also approaching the seasonally weak fall period. Since many of the infamous stock market crashes occurred between September and November, we caution our readers to be increasingly careful with committing new funds to “risk on” investments.

indu

The biotech sector has been one of the market leaders in the last 18 months. The chart shows that the sector corrected hard from the March highs in April and May, but was able to rally back in June. The large 3.14% drop of the Fidelity Biotechnology Fund (FBIOX), which is the largest biotechnology fund available to investors, is concerning, because it may signal the start of a market correction.

fbiox

While aggressive equity sectors got hit hard today, long-term Treasury bond rates trended lower, which helped interest rate sensitive investments to go higher. One of our current favorites in this space is the Fidelity Real Estate Portfolio Fund (FRESX). FRESX was one of the few Fidelity funds that posted a gain today and we would not be surprised to see FRESX to hold its current bullish trend even if stock market conditions weaken.

fresx

Buy and sell signals for Fidelity funds are available at FidelitySignal.com

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Money flow: Where is the bull market now?

While the stock market selling continues, the bull market in treasury bonds accelerates.

Fidelity Spartan Long-term Treasury Bond Index fund (FLBAX) closed up 2.67% up

The Fidelity Spartan Long-term Treasury Bond Index fund (FLBAX) closed up 2.67%

Stocks drop again, but there is a silver lining

Three days ago we cautioned investors about the continued bearish outlook for the stock market. Today, negative economic reports and renewed worries about the European debt crisis triggered another sell-off globally. We wouldn’t be surprised to see the selling to continue.

The Fidelity Spartan 500 Index fund (FUSEX) dropped 4.44% today.

The Fidelity Spartan 500 Index fund (FUSEX) dropped 4.44% today.

The silver lining is that the U.S. stock market has not yet broken below the recent lows, which can act as a support level. Furthermore, there are still a few areas where gains have been made. For example, investors continued to rotate into the safety of U.S. treasury bonds resulting in a 1.68% gain by the Fidelity Spartan Long-Term Treasury Bond Index fund (FLBAX).

The Fidelity Spartan Long-Term Treasury Bond Index fund (FLBAX) gained 1.68%.

The Fidelity Spartan Long-Term Treasury Bond Index fund (FLBAX) gained 1.68% as investors continue to rotate into the safety of U.S. treasury bonds.