This pick list highlights constituents of the Morningstar US Mid Cap Index that we believe offer investors the best risk-adjusted return prospects. The market capitalization range for U.S. mid-caps typically falls between $1 billion and $8 billion and represents 20% of the total capitalization of the U.S. equity market.

This pick list highlights constituents of the Morningstar US Mid Cap Index that we believe offer investors the best risk-adjusted return prospects. The market capitalization range for U.S. mid-caps typically falls between $1 billion and $8 billion and represents 20% of the total capitalization of the U.S. equity market.

Monday Tee Up: Back to Inflation

This pick list highlights constituents of the Morningstar US Mid Cap Index that we believe offer investors the best risk-adjusted return prospects. The market capitalization range for U.S. mid-caps typically falls between $1 billion and $8 billion and represents 20% of the total capitalization of the U.S. equity market.

The Russell 2000 (IWM) offers a fascinating and challenging-to-read chart (long-term neutral). IWM peaked near the $160 level in September 2018 and in early 2020. Then, after the pandemic, small-caps ripped higher, with IWM peaking just below $240 in November of 2021. The index then crashed into mid-2022, right to the prior highs from 2018 and 2020 near $160. After a rally to near a prior breakout level around $200, IWM fell right back to its prior peak at $160 in October 2022. Another trip to the top of the range near $200 failed, as did an attempt to break out of the range in July 2023, which led to another successful test of the bottom of the range near $160 in October 2023.

Last week, we noted that weekly insider-sentiment data from Vickers Stock Research was 'almost' exactly what we'd expect at the start of earnings season, with insiders cautiously positioning themselves for weeks in which they would be on the sidelines because of trading restrictions. But our 'almost' was the result of a significantly bearish one-week sell/buy ratio from insiders at companies that trade on the Nasdaq. That ratio was 13.20 on a scale where anything over 2.50 is bearish, and we wondered if insiders were concerned about a 'buy the rumor, sell the fact' response from investors once earnings reports started to flow in. Now, we can comment on what was indeed a volatile week for the Nasdaq - one that did not overly impact the broader index itself, but did feature headline-grabbing drops for some high-profile stocks.

Stocks were mixed on Monday morning as investors weighed the takeover of failing First Republic Bank by JPMorgan. JPM shares rose nearly 3% on news of the acquisition. Investors also awaited the Fed's interest rate decision and economic commentary later this week. A 25-basis-point rate hike is widely expected. The Dow rose 0.2%, the S&P rose 0.1%, and the Nasdaq fell 0.2%. Crude oil fell to $75.50 per barrel while gold fell $8 to $1992 per ounce.

The current advance by the large-cap indices has occurred because of some very nice gains in the mega-cap stocks, that within the context of an overall neutral-to-poor period of market breadth. Over the past six months (since the start of October) as well as the year-to-date, the leader-board is littered with mega-caps, mostly from the Technology sector. At the same time, the Nasdaq 100 advance-decline line has improved -- but remains range bound. Interestingly, we heard the same complaint in the late 1990s -- which was a pretty good time for the QQQs and the S&P 500.

Since November, we have highlighted quite a few Technology stocks, this as the investment community as a whole was saying that those stocks are not in the next "leadership" sector. And they may be right about that. But when a group of stock charts from one industry look good and are showing relative strength, somebody knows something. We have been impressed with the action in the semiconductor stocks, as some of them have moved to all-time highs while others have nearly completed very large bullish bases.

Stocks rose on Friday morning, extending their Thursday rally. Services sector data was better than expected. The Institute for Supply Management said that its nonmanufacturing PMI slipped to 55.1 in February, down slightly from 55.2 in January but still indicating expansion. The reading also topped the Reuters consensus forecast of 54.5. On the earnings front, Costco shares fell more than 3% after the company missed the fiscal 2Q consensus sales estimate amid cautious consumer spending. The Dow rose 0.7%, the S&P 1.1%, and the Nasdaq 1.3%. Crude oil rose more than 1% to $79 per barrel, while gold rose $13 to $1853 per ounce.Stocks rose on Friday morning, extending their Thursday rally. Services sector data was better than expected. The Institute for Supply Management said that its nonmanufacturing PMI slipped to 55.1 in February, down slightly from 55.2 in January but still indicating expansion. The reading also topped the Reuters consensus forecast of 54.5. On the earnings front, Costco shares fell more than 3% after the company missed the fiscal 2Q consensus sales estimate amid cautious consumer spending. The Dow rose 0.7%, the S&P 1.1%, and the Nasdaq 1.3%. Crude oil rose more than 1% to $79 per barrel, while gold rose $13 to $1853 per ounce.

The chart setup for several equity indices looks very bullish, as if there is an upside explosion that just needs to be ignited. Yes, we just said that. Unfortunately, the indices in question do not include the S&P 500, the Nasdaq, or the Nasdaq 100. They do include the Dow Industrials, the NYSE, the S&P 500 Equal Weight (SPXEW), and the S&P MidCap 400 (MDY). While the ignition would likely come from the Federal Reserve, the deepening darkness in many economic indicators suggests that the broad stock market could have more tough sledding ahead.

Stocks fell on Thursday morning, extending yesterday's Fed-driven selloff. On Wednesday, Fed Chair Jerome Powell said that the central bank still had 'some ways to go' on rate hikes, and that interest rates at the end of the cycle could be higher than previously expected. The comments dashed investor hopes for a quick pivot to diminishing rate hikes. On the earnings front, Qualcomm shares fell sharply after the chipmaker issued much weaker than expected fiscal 1Q23 guidance, citing slower demand for smartphones. The Dow fell 0.5%, the S&P 0.6%, and the Nasdaq 0.5%. Crude oil fell 2% to $88 per barrel, while gold fell $24 to $1626 per ounce.

Stocks were mixed on Monday morning after recovering from early losses. Manufacturing data was slightly better than expected. The Institute for Supply Management said that its national factory index slipped to 52.8 in July, down from 53.0 in June but above the Reuters consensus forecast of 52.0. The Dow and the S&P were flat, while the Nasdaq rose 0.5%. Crude oil fell more than 4% to $94 per barrel, while gold fell slightly to $1782 per ounce.

As we start the second half of 2022, we remain disciplined by looking at stocks and sectors in which we have confidence. Stocks took a beating in the first half, and at times like this, investing principles are critical. This week, we look at Basic Materials. This is not a flashy sector, often overlooked because other sectors garner headlines where consumers are more familiar with brand names. That's partly why we like the sector (it's under-the-radar), but that's not enough. The companies we examine within the sector have to stand on their own, with solid fundamentals and growth outlooks. Challenges in the supply chain persist, but have eased. Inflation is high and the Fed is raising interest rates to quell higher prices. In this environment, we expect demand for commodities to remain robust and for pricing to remain strong. The sector currently accounts for 2.8% of the S&P 500, and includes industries such as chemicals, paper, metals, and mining. Over the past five years, the weighting has ranged from 2% to 4%. We think investors should Over-Weight the sector and allocate 3% of diversified portfolios to stocks in the sector. Basic Materials is slightly over-performing the S&P 500 thus far in 2022, with a loss of 18.7% compared to the S&P's loss of 20.6%. Here are some of our BUY-rated Basic Materials companies, which were selected using the Argus screening tool and requiring that the stocks be BUY-rated and with an Argus Financial Strength rating of at least Medium-High. We feel these companies currently are best in class for this sector. Some of these companies also are included in our Model Portfolios.

Stocks continued to fall on Monday morning following Friday's sharp selloff, as investors weighed prospects for aggressive Fed rate hikes along with a widening COVID outbreak in China. On the earnings front, Coca-Cola posted better-than-expected first-quarter sales and earnings, helped by price hikes, and reaffirmed its full-year guidance. The Dow fell 1.0%, the S&P 1.0%, and the Nasdaq 0.2%. Crude oil fell more than 5% to $97 per barrel, while gold traded near $1895 per ounce.

It could be an interesting week for the stock market as earnings season kicks off with some of the big banks as well as some retailers reporting. We will also hear from some Fed speakers and get a few important economic stats, including March CPI, and updates on PPI, retail sales, and consumer sentiment.

Stocks were mixed on Monday morning as investors continued to assess the impact of Fed interest rate hikes along with developments in Ukraine, as Ukrainian forces refused to surrender in the port of Mariupol. The EU also considered a full ban on Russian energy imports, a move favored by Poland and the Baltic countries but thus far rejected by Germany. Boeing shares fell 4% after the crash of a China Eastern 737-800 jet in southern China. The Dow fell 0.4%, the S&P rose 0.2%, and the Nasdaq rose 0.1%. Crude oil jumped $6 to $111 per barrel, while gold traded near $1935 per ounce.

We have a series of lower lows and lower highs on the indices, failed rally attempts, an absence of strong market breadth, key technical levels acting like ceilings, major indices below their long-term 200-day averages, 53% of the S&P 500 stocks below their 200-day averages, 63% of "500" stocks below their 50-day averages, 54% of the S&P 100 stocks below their 200-day, and 63% of Nasdaq 100 stocks below their 200-day. That is not the definition of a healthy stock market.

The Federal Reserve Open Market Committee is scheduled to meet on March 16-17. The central bank is almost certain to raise interest rates from the rock-bottom levels that were set when the pandemic began in March 2020. How many times will the Fed hike rates and how high will rates go? The uncertainty -- along with the concern that the Fed may move too quickly and plunge the U.S. economy into recession -- has contributed to the stock correction endured so far in 2022. But a rising federal funds rate doesn't have to result in equity market losses. We studied stock performance during the six periods of rising federal funds rates since 1980 (1983-84, 1988-89, 1993-95, 1999-2000, 2004-06, and 2016-19). On average, these periods lasted about 19 months. The average change over the cycle was a cumulative hike of 300 basis points. The fed funds rate at the end of the cycle averaged 3.8% -- not far from the 4.5% average federal funds rate since 1980. Our study found that stocks generally perform better knowing the hikes are coming (up 6.3% in the six months before the cycle) than after the cycle actually begins (4.8% in the six months after the first hike). Performance across the cycle was an annualized 9.0%. While that is less than the average annual return of 10.7% in the S&P 500 since 1980, it is much below the average. In a nutshell, a rising-rate environment does not usually crush the stock market, but it does impact performance.

While the pandemic and the prospect of higher interest rates remain the long-term drivers for stocks these days, the Russia/Ukraine situation has captured near-term trading sentiment as the world waits to see what happens. Meanwhile, corporate insiders also seem to be in wait-and-see mode. Following weeks of steady improvement, the overall Insider Index from Vickers Stock Research (which looks at six months of trading activity) has stopped dead in its tracks at -15.30, just short the neutral reading of -14.00. Nonetheless, volumes have continued to grow, with over 1,400 insider buy and sell orders placed across all exchanges over the last week, although we note that this value continues to fall short of historical volumes usually seen at this point in the earnings-release cycle

After reaching euphoric levels in November, sentiment has seen a major bearish turn. In some cases, certain indicators adjusted as if we just went through a bear market. So unless we are entering a bear market, which we don't see, a throwing in of the towel by many should lead to higher prices in the next three to six months, maybe longer.

It's been over two months since we last commented on precious metals in the space, as the breakout in November failed miserably. While we hope (for the sake of gold bugs) that we don't jinx them again, there are some constructive things going on in the metals complex. GLD bounced off its mid-December low and is back above its 50- and 200-day averages. SLV lost and then recaptured the bottom of its range going back to September 2020 and is now challenging the underside of its 50-day average.

With major stock indices dancing around all-time highs (seemingly the result of a so-far solid earnings season), the volume of insider transactions is predictably low (also the result of earnings season, with associated trading restrictions). That said, the current low transaction volume is particularly low. Indeed, it is now six consecutive weeks that Vickers' Stock Research has processed fewer than 1,000 weekly insider trades that met the criteria for inclusion in the Weekly Insider Report. The last time we saw such a run was back in September of 2020. One can argue that insiders then and now were/are biding their time, with no sense of urgency to sell stocks but also no great reason to buy shares at lofty levels.

Stocks continued their rally on Friday morning amid strong earnings reports from American Express and Twitter. However, Intel shares fell more than 6%, despite solid second-quarter results, after the company projected declining gross margins over the remainder of the year. The Dow rose 0.5%, the S&P 0.8%, and the Nasdaq 0.8%. Crude oil traded near $72 per barrel, while gold fell $6 to $1799 per ounce.

April 2021 lived up to its billing as the best stock month of the first half. During April, the S&P 500 appreciated 5.2%, better than any month so far this year; March was closest with a 4.2% gain. Through the end of the fourth month, the S&P 500 is up 11.3% year-to-date.

Insider sentiment continues to suggest a reasonable degree of caution. As we have said for several weeks now, this caution does not mean that a major correction is bound to occur. But it does suggest that there are few near-term catalysts that insiders see as likely to drive stock prices (around all-time highs already) quickly higher.

In 2020, the dollar surpassed cycle highs initially set in 2001-2002 and then again in late 2016. But since peaking in April 2020, the greenback has drifted lower. Currently, on a real trade-weighted basis, the dollar is in line with the average valuation over the past 20 years, and down from a 10% overvaluation in April. The fairly valued U.S. currency reflects several factors, but primarily the relative strength of the U.S. economy and global investor confidence in the U.S. Federal Reserve and Department of Treasury as the world battles COVID-19. Looking ahead, we anticipate a trading range around current levels for the greenback this year. That's because we think U.S. GDP may struggle to rebound -- not unlike the European and Asian industrialized economies. President Joe Biden is planning another round of fiscal stimulus, but there is no certainty that the divided Congress will again reach agreement to help the consumer-led economy. At some point, traders may become wary of the high level of U.S. debt relative to GDP. The drop in the dollar is beneficial to many sectors of the U.S. economy (including exports, basic materials companies and tourism) once the country's borders are reopened to travelers from abroad.

The stock market rallied last week, closing a holiday-shortened Friday at new closing records for Nasdaq and the S&P 500. With just a single trading day left in November, the market is on track for its best month since April. On Friday, the Dow Jones Industrial Average rose 38 points, or 0.13%. The S&P 500 edged up 9 points, or 0.24%, and the Nasdaq Composite was up 111 points or 0.92%. Last week, the Dow was up 1.45%, returning to growth after the month's only down week. The S&P 500 was up 1.6%. The Nasdaq was up 301 points or 0.92%. For the year-to-date, the DJIA remains in positive territory with a gain of 4.8%. The S&P is up 12.6%, and the Nasdaq is up 36.0%. Over the past 52 weeks, the Dow is up 6.2%, the S&P 500 is up 15.4%, and the Nasdaq is up 40.2%.

Back on August 7, with gold futures hitting an all-time high over $2,080/oz. and silver soaring above $29/oz., we asked the following questions: What's behind these parabolic moves and is there anything that can stop this metals freight train?

Back on August 7, with gold futures hitting an all-time high over $2,080/oz. and silver soaring above $29/oz., we asked the following questions: What's behind these parabolic moves and is there anything that can stop this metals freight train?

The dollar had been trending higher in 2020 and had surpassed cycle highs set initially in 2001-2002 and then again in late 2016. But since peaking in April, the greenback has drifted lower. Currently, on a real trade-weighted basis, the dollar is 5% above the average valuation over the past 20 years, down from a 10% overvaluation in April. The fully valued U.S. currency reflects several factors, but primarily the relative strength of the U.S. economy and global investor confidence in the U.S. Federal Reserve and Department of Treasury as the world battles COVID-19. We anticipate a trading range around current levels for the greenback this year. That's because we think U.S. GDP may struggle to rebound -- not unlike the European and Asian industrialized economies. Congress is debating another round of fiscal stimulus, but there is no certainty that the divided government will again reach agreement to help the consumer-led economy. As well, at some point, traders may become wary of the high level of U.S. debt relative to GDP. Lastly, the lofty current valuation of the greenback implies that other currencies -- and even gold or bitcoin -- are possibly undervalued, and traders can be expected to bid up those values over time.

The dollar had been trending higher in 2020 and had surpassed cycle highs set initially in 2001-2002 and then again in late 2016. But since peaking in April, the greenback has drifted lower. Currently, on a real trade-weighted basis, the dollar is 5% above the average valuation over the past 20 years, down from a 10% overvaluation in April. The fully valued U.S. currency reflects several factors, but primarily the relative strength of the U.S. economy and global investor confidence in the U.S. Federal Reserve and Department of Treasury as the world battles COVID-19. We anticipate a trading range around current levels for the greenback this year. That's because we think U.S. GDP may struggle to rebound -- not unlike the European and Asian industrialized economies. Congress is debating another round of fiscal stimulus, but there is no certainty that the divided government will again reach agreement to help the consumer-led economy. As well, at some point, traders may become wary of the high level of U.S. debt relative to GDP. Lastly, the lofty current valuation of the greenback implies that other currencies -- and even gold or bitcoin -- are possibly undervalued, and traders can be expected to bid up those values over time.

Stocks finished mixed on Thursday amid new weekly employment data and concerns about the lack of progress on a fiscal stimulus plan in Washington. Congressional Democrats, who proposed a $3.4 trillion plan in May, appear prepared to compromise on a smaller plan in the $2 trillion range, while the White House and its Republican allies in the Senate have thus far refused to move from their original $1 trillion proposal. The negotiations could be further complicated by Thursday's data, which showed first-time unemployment benefit claims falling below 1 million for the first time since March, as well as a decline in continuing claims. Still, unemployment remains at record levels, with more than 28 million Americans receiving some form of unemployment benefits as of late July, up from 1.7 million a year earlier. The Dow fell 0.29%, the S&P fell 0.20%, and the Nasdaq rose 0.27%. Crude oil fell to $42 per barrel, while gold rose $12 to $1961 per ounce.

Stocks finished mixed on Thursday amid new weekly employment data and concerns about the lack of progress on a fiscal stimulus plan in Washington. Congressional Democrats, who proposed a $3.4 trillion plan in May, appear prepared to compromise on a smaller plan in the $2 trillion range, while the White House and its Republican allies in the Senate have thus far refused to move from their original $1 trillion proposal. The negotiations could be further complicated by Thursday's data, which showed first-time unemployment benefit claims falling below 1 million for the first time since March, as well as a decline in continuing claims. Still, unemployment remains at record levels, with more than 28 million Americans receiving some form of unemployment benefits as of late July, up from 1.7 million a year earlier. The Dow fell 0.29%, the S&P fell 0.20%, and the Nasdaq rose 0.27%. Crude oil fell to $42 per barrel, while gold rose $12 to $1961 per ounce.

As we move into the second half, S&P sector performance remains very consistent. For the year-to-date (YTD), Technology (XLK) continues to have a massive lead over most other sectors, rising almost 15% so far in 2020. Based on some individual tech names, the performance pales in comparison to some of the asymptotic tech issues. Bringing up the rear is Energy (XLE), with a massive 35% drubbing, and Financials (XLF), with a 24% thrashing.

As we move into the second half, S&P sector performance remains very consistent. For the year-to-date (YTD), Technology (XLK) continues to have a massive lead over most other sectors, rising almost 15% so far in 2020. Based on some individual tech names, the performance pales in comparison to some of the asymptotic tech issues. Bringing up the rear is Energy (XLE), with a massive 35% drubbing, and Financials (XLF), with a 24% thrashing.

With the near-parabolic move by the S&P 500 since May 29, the index bumped its head against the top of the channel that has been in place since early April. For now, that channel resistance is keeping a lid on prices. During the pop higher, we saw 90% up days (90% of NYSE issues rose and 90% of the volume went into rising stocks) on June 5 and 8. This type of strength in breadth usually is seen coming off a bottom, not after an extended move such as we have seen.

With the near-parabolic move by the S&P 500 since May 29, the index bumped its head against the top of the channel that has been in place since early April. For now, that channel resistance is keeping a lid on prices. During the pop higher, we saw 90% up days (90% of NYSE issues rose and 90% of the volume went into rising stocks) on June 5 and 8. This type of strength in breadth usually is seen coming off a bottom, not after an extended move such as we have seen.

Stocks pared early losses on Thursday morning after sharp declines on Tuesday and Wednesday, a day after Fed Chair Jerome Powell said that the pandemic could cause lasting damage to the U.S. economy. Weekly jobless claims approached 3 million, down from the prior week but well above the Reuters consensus forecast of 2.5 million. The Dow fell 0.6%, the S&P 0.8%, and the Nasdaq 0.9%. Crude oil rose 4% to $26 per barrel, while gold rose $22 to $1738 per ounce.

The bears are trying to wrestle control back from the bulls for the third time since April 21. The chart has a "rolling over" look, and has traced out a minor lower high and minor lower low for the first time since the March bottom. The five-day/13-day EMA crossover is not far from a sell signal, with the shorter average only about six points above the longer average. Both averages are falling, which adds to the probability of a bear cross. The last signal was a buy signal on April 6.

Stocks pared early losses on Thursday morning after sharp declines on Tuesday and Wednesday, a day after Fed Chair Jerome Powell said that the pandemic could cause lasting damage to the U.S. economy. Weekly jobless claims approached 3 million, down from the prior week but well above the Reuters consensus forecast of 2.5 million. The Dow fell 0.6%, the S&P 0.8%, and the Nasdaq 0.9%. Crude oil rose 4% to $26 per barrel, while gold rose $22 to $1738 per ounce.

The bears are trying to wrestle control back from the bulls for the third time since April 21. The chart has a "rolling over" look, and has traced out a minor lower high and minor lower low for the first time since the March bottom. The five-day/13-day EMA crossover is not far from a sell signal, with the shorter average only about six points above the longer average. Both averages are falling, which adds to the probability of a bear cross. The last signal was a buy signal on April 6.