Sunday, February 10, 2013

Sector & Group Rotation Notes – 2/10/13



Listed below are notes from the author's weekly analysis.

The Sector Trends blog does not make forecasts and does not cheerlead with its commentary. The perspective offered is on current trends in the market, which sectors and groups are rotating, and which stocks from these groups are likely to perform best in a neutral/positive environment. Readers need to provide their own assessment of market health, employ their own risk management strategies, and trade accordingly. In a declining market nearly all equities will suffer, including those found listed here. 

All data and charts displayed here are the property of MarketSmith, and are published here with their permission.

Market Overview:
The table below shows price performance for key markets and sectors over the trailing 26 weeks, and is sorted high to low by 5 week performance. The green and red shading denotes relative performance +/- to the SP 500 for the time period in question.

Industry Group
1 Week Gain
2 Week Gain
3 Week Gain
5 Week Gain
13 Week Gain
26 Week Gain
Pboe Oil Service Index
-0.8%
1.5%
3.5%
6.9%
18.7%
8.6%
Philadelphia Semiconductor Index
1.0%
2.3%
3.5%
6.8%
14.9%
4.6%
Dow Jones Transportation Index
0.9%
0.7%
3.8%
6.8%
17.8%
16.7%
Russell 1000 Energy Index
0.2%
1.2%
3.1%
5.4%
11.7%
7.3%
DJIA
-0.1%
0.7%
2.5%
4.2%
9.2%
5.9%
Philadelphia Housing Index
-1.2%
-2.8%
-0.3%
4.0%
14.5%
34.6%
Russell 2000
0.3%
0.9%
2.3%
3.9%
14.9%
14.0%
SP 500
0.3%
1.0%
2.2%
3.5%
10.0%
8.0%
Nasdaq Composite
0.5%
1.4%
1.9%
3.0%
9.9%
5.7%
KBW Large Cap Bank Index
0.5%
1.6%
2.8%
2.4%
14.3%
18.0%
Philadelphia Utility Index
-0.1%
0.8%
2.5%
2.0%
5.4%
-3.7%
Cboe Technology Index
2.1%
3.1%
0.3%
0.8%
4.3%
-3.0%
Philadelphia Gold/Silver Index
0.3%
1.1%
-5.5%
-6.2%
-15.8%
-3.8%

Last week the market made it six straight weeks of gains for the Nasdaq, Russell 2000, and S&P 500; the Dow broke its 5 week stretch with a 0.1% loss. The Nasdaq led the broad based indices with a 0.5% gain.

Economic data was modestly positive. On Monday factory orders showed growth but missed consensus slightly coming in at 1.8% vs. consensus 2.4%, but a positive was an unusually strong 0.8% growth in unfilled orders.  Tuesday's ISM non-manufacturing index edged by consensus 55.2 vs. 55.1(values above 50 indicate expansion), suggesting  a stronger economy adding to job growth. Thursday's jobless claims data missed consensus by 6K  but the month to month average shows slow improvement.

Earnings continue to power individual stocks higher. Shutterfly (SFLY) was highlighted here several weeks ago, and again last week this blog pointed out its volatility squeeze; SFLY gained 25.8% for the week after releasing earnings results. LinkedIn (LNKD) was highlighted in the January 13th and 27th blog posts and gained 21.5% for the week after announcing earnings Thursday AMC. Hornbeck Offshore Services (HOS) was featured last Sunday and gained 13.7% for the week after Wednesday's earnings announcement.

Next week sees releases from 500 companies, including 241 with market caps $1B+. KORS, ASGN, RKUS, IPGP, OII, CLMT, PXD, EOG, TRIP, TRLA, RAX, PCYC, ALXN, REGN, FOSL, PDFS and ELLI all report among many others.

Defensively oriented groups continue to perform modestly and the advance/decline line is hitting new highs; both data points suggest the market could head higher.






Group Themes:
The tables below show commodity, technology and defensively related group's price performance over the trailing 1, 2, 3, 5, 13 and 26 week periods.

33 Commodity Oriented Groups:
1 wk
2 wk
3 wk
5 wk
13 wk
26 wk
# in the top 50 groups (out of 197)
8
8
7
7
11
7
# in the bottom 50 groups (out of 197)
12
7
9
10
6
8

28 Technology Oriented Groups:
1 wk
2 wk
3 wk
5 wk
13 wk
26 wk
# in the top 50 groups (out of 197)
7
7
7
7
6
0
# in the bottom 50 groups (out of 197)
9
12
11
10
4
13

30 Defensively Oriented Groups:
1 wk
2 wk
3 wk
5 wk
13 wk
26 wk
# in the top 50 groups (out of 197)
8
6
5
8
2
7
# in the bottom 50 groups (out of 197)
4
3
5
5
11
9

For the second consecutive week there are no clear patterns of rotation between the three different industry group themes. Performance of the defensively oriented groups is tame.


Industry Group Performance:

Energy: For the past two weeks the Sector Trends blog has pointed out the strength in the Oil&Gas-Drilling group (G1381), Oil&Gas-Field Services group (G1380), and Oil&Gas-Refining/Mktg group (G2900) groups.

Last week this continued as the Oil&Gas-Field Services group (G1380) was the fourth best performing group on the week gaining 4.9%, and jumping +27 from #111 to #84 in MarketSmith's industry group rankings.  The Oil&Gas-Refining/Mktg group (G2900) came in at #12 in weekly price performance gaining 3.3%. Six separate groups from the energy sector rank in the top 50 of the trailing 1,2 and 5 week price performance lists.

On Friday Calumet (CLMT) broke through its 33.96 pivot out of a 17 week consolidation gaining 4.9% for the day on nearly 2x average volume. CLMT is part of the red hot Oil&Gas-Refining/Mktg group, and its move higher was perhaps spurred by news of a new refinery in North Dakota. However, CLMT has been under accumulation and its more likely investors are looking forward to next Wednesday morning's earnings announcement. CLMT is now 3% past its pivot.



Ultrapar (UGP) is under accumulation with an "A+" accumulation/distribution rating and a 50 day up/down volume ratio of 1.8. UGP is 2% past its pivot out of a 36 week consolidation.



On Friday Northern Tier Energy (NTI) broke out of a first stage 6 week flat base gaining 7.4% on 2x average volume. NTI is now outside the 5% buy zone, but has had quite a run over the past 3 weeks and could pull back. As seen on the chart NTI is experiencing heavy accumulation, and has been on a tear since completing a recent primary offering January 18th.


Leisure: Leisure related groups prospered last week as more investors factored in the impact of an improving economy; 5 of 6 leisure groups finished in the top 50 of the 1 week price performance list, and 4 of 6 are in the top 50 of the trailing 3 week list.

Carnival (CCL) is under heavy accumulation with a 50 day up/down volume ratio of 1.6, but a 25 day ratio of 2.3! FY '13 EPS are forecast +29%, and FY '14 +22%. CCL has less debt than its peers, and controls nearly 50% of the cruise market. About 38% of its business comes from Europe, and this segment of its business should grow as the Europe's economy recovers. CCL has a 39.62 pivot out of a cup & handle base.


Las Vegas Sands (LVS) is also under heavy accumulation with "A-" accumulation/distribution rating and a 50 day up/down volume ratio of 1.6 and a 25 day ratio of 2.1. LVS is 1% past its pivot out of a cup & handle base.


MGM Resorts (MGM) is another casino stock breaking out of a cup & handle.


Penn National (PENN) is 2% past its pivot out of a double bottom base. 50 day up/down volume 1.5, 25 day ratio 2.3.

 
Imax (IMAX) has broke out of this short 5 week consolidation on Friday gaining 3.7% on over 2x average volume. IMAX closed at 25.04, just above its 24.96 pivot. Weekly chart:




Semiconductors: The Philadelphia Semiconductor Index has been steadily pushing higher, and within MarketSmith's semiconductor related groups the Elec-Semiconductor Mfg group (G3677) has been a standout. The group ranks in the top 20 of the trailing 2, 3, 5 and 13 week price performance lists, and this past week jumped +34 from #81 to #47 in MarketSmith's industry group rankings.

On Friday Diodes Inc. (DIOD) broke out of a 3 weeks tight pattern gaining 4.8% on almost 2x average volume. DIOD is under accumulation with a 50 day up/down volume ratio of 2.0, 25 day 2.3; and has a "B+" accumulation/distribution rating. FY '13 EPS are forecast +92%.


Metals: The Metal Proc & Fabrication group (G3499) ranks 42 on the trailing 13 week price performance list with a 17.7% gain, and over the trailing 3 weeks has jumped +35 in MarketSmith's industry group rankings from #81 to #46.

Commercial Metals (CMC) is seeing heavy accumulation with an "A" accumulation/distribution rating and an up/down volume ratio of 2.0. Analysts forecast FY '13 EPS +52% and FY '14 +36%. CMC is 3% past its pivot out of a yearlong consolidation.Weekly chart:





Internet: The Internet-Content group (G3334) got a boost from LNKD's stellar performance last week and now ranks in the top 25 of the trailing 1, 2, 3, 5 and 13 week price performance lists; and last week jumped +37 in MarketSmith's industry group ranks from #109 to #72.

Trip Advisor (TRIP) is scheduled to announce earnings Wed. 2/13. TRIP is at its pivot out of a cup & handle base, and is on the cusp of new highs. Accumulation is solid with a "B" accumulation/distribution rating and 50 day up/down volume ratio of 1.5. As the chart shows, TRIP's EPS announcements tend to be binary events...


Follow up: The Sector Trends blog has highlighted Michael Kors numerous times over the past month. KORS is scheduled to release earnings Tuesday morning, 2/12/13. KORS gapped through a 58.62 buy point two weeks ago Monday, but was pushed back within the first 5 minutes of the day. After selling off for a few days KORS saw solid buying in above average volume last week. Strong earnings should send KORS back over its buy point.

 

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