Sunday, December 29, 2013

Sector/Group Rotation Notes - 12/29/13



Due to holiday travel there’s only time for some brief observations this week:

It was a solid week for the market with the major indexes gaining ~ 1.3% for the week. Economic data continued to be positive with durable goods orders coming in at M/M +3.5% vs. a consensus expectation of +1.5%, and December consumer sentiment rose higher with a reading of 82.5 vs. November’s 75.1. The Richmond Fed manufacturing index came in very strong at 13 vs. a consensus expectation of 10.  New home sales for November came in at 464K vs. 450K consensus, and the September and October readings were revised sharply higher. New home prices gained 4.5% for the month, and have gained 10.6% for the year, suggesting builders are gaining pricing power.

The yield on the 10 year U.S. Treasury has increased 26 basis points over the past month to 3%. If this rate of increase were to continue into early 2014 it could become problematic for the market.

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Industry Group Performance:

Housing: Last week’s analysis showed the Philadelphia Housing Index breaking higher out of a 3 month ascending triangle pattern. The move continued this past week as he index gained an additional 3.7%. Five housing related industry groups ranked in the top 50 on the trailing 1 week price performance list, led by the Bldg-Resident/Comml group which came in at #5 with a 4.3% gain.

Standard Pacific Corp (SPF) was highlighted last week and gained 5.6%, followed by MTH +3%, AMWD +3%, EXP +2.8%, TPH -0.6%, and HW -1.5%. All of these charts continue to look attractive, and TPH especially so given its robust quarterly results and strong earnings forecasts.

Mining: Mining was the top performing sector for the week gaining 4.6%. The Mining-Metal Ores group is on a tear ranking #11 on the trailing 5 week price performance list with a 9.6% gain, and over the last 2 weeks has jumped +51 in MarketSmith’s industry group rankings to #108. The Mining-Gold/Silver/Gems group ranked #4 in price performance last week with a 4.5% gain, but still lags far behind with a MarketSmith industry group rank of #195.

Media: Media related groups had a very strong week with all 5 groups ranking in the top 36 on the trailing 1 week price performance list, and the blog calculates media was the second best performing sector last week with a 3.8% gain. Two weeks ago the sector had only 1 industry group ranked in the top 50 of MarketSmith’s industry group rankings, now there are 3 groups ranked in the top 40.

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

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. 

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