Listed below are notes from the author's weekly analysis.
The blog will not publish Labor Day weekend, but should return Sunday,
September 9th.
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 most of the charts displayed here are the
property of MarketSmith, and are published here with their permission. Clicking
once on a chart enlarges it for enhanced readability.
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
|
|
Philadelphia Gold/Silver Index
|
5.3%
|
6.4%
|
12.1%
|
14.2%
|
6.8%
|
-15.8%
|
|
Philadelphia Semiconductor Index
|
-1.5%
|
-1.7%
|
2.3%
|
9.3%
|
7.2%
|
-5.9%
|
|
KBW Large Cap Bank Index
|
-0.1%
|
1.2%
|
2.4%
|
5.1%
|
7.0%
|
5.5%
|
|
Nasdaq Composite
|
-0.2%
|
1.6%
|
3.4%
|
4.9%
|
8.2%
|
3.6%
|
|
Philadelphia Housing Index
|
0.8%
|
5.4%
|
8.7%
|
4.8%
|
15.7%
|
22.1%
|
|
Russell 1000 Energy Index
|
-0.8%
|
-0.9%
|
1.6%
|
4.8%
|
9.6%
|
-5.8%
|
|
Pboe Oil Service Index
|
-1.4%
|
-1.0%
|
2.2%
|
4.7%
|
8.9%
|
-12.8%
|
|
SP 500
|
-0.5%
|
0.4%
|
1.4%
|
3.6%
|
7.1%
|
3.3%
|
|
FXE euro
|
1.4%
|
1.8%
|
1.1%
|
2.8%
|
-0.1%
|
-7.2%
|
|
DJIA
|
-0.9%
|
-0.4%
|
0.5%
|
2.6%
|
5.6%
|
1.3%
|
|
Russell 2000
|
-1.3%
|
1.0%
|
2.6%
|
2.2%
|
5.6%
|
-2.1%
|
|
Dow Jones Transportation Index
|
-1.5%
|
1.1%
|
0.6%
|
0.9%
|
0.8%
|
-0.4%
|
|
Philadelphia Utility Index
|
-1.4%
|
-3.0%
|
-4.0%
|
-3.8%
|
1.6%
|
3.5%
|
Last week the broad based equity indexes retreated
marginally with losses ranging from -0.2% on the Nasdaq to -1.3% on the Russell
2000. Both the Nasdaq and SP 500 are approaching highs from early April of this
year and could be expected see some resistance in this area. The fact that the
Nasdaq was the strongest of the indexes and volume was well below average for
all of the indexes suggests we are seeing normal price action and the market
environment remains healthy.
Falling Spanish and Italian bond yields, combined with
recent strength in the euro suggests market fears of eurozone dissolution are,
at least for the moment, receding.
Gold broke out of a descending triangle pattern and
volatility squeeze this week, an event covered in greater detail below.
Larger 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)
|
3
|
2
|
6
|
5
|
7
|
1
|
|
# in the
bottom 50 groups (out of 197)
|
13
|
12
|
5
|
5
|
9
|
16
|
|
28 Technology Oriented Groups:
|
1 wk
|
2 wk
|
3 wk
|
5 wk
|
13 wk
|
26 wk
|
|
# in the
top 50 groups (out of 197)
|
6
|
7
|
13
|
14
|
8
|
3
|
|
# in the
bottom 50 groups (out of 197)
|
7
|
7
|
4
|
6
|
7
|
7
|
|
30 Defensively Oriented Groups:
|
1 wk
|
2 wk
|
3 wk
|
5 wk
|
13 wk
|
26 wk
|
|
# in the
top 50 groups (out of 197)
|
16
|
12
|
6
|
5
|
9
|
14
|
|
# in the
bottom 50 groups (out of 197)
|
7
|
8
|
12
|
13
|
7
|
4
|
Commodity oriented groups were hit hard last week, the 13
groups in the bottom 50 for the week averaged a 2.9% decline and were spread
over a variety of sectors. This marks two consecutive weeks of softness, and
represents an acceleration of last week's weakness.
Technology groups held up reasonably well, with groups
spread fairly evenly across the performance spectrum.
Defensively oriented groups outperformed with 16 in the top
50 and only 7 in the bottom 50. However, a closer look at the data suggests
this action may not be as ominous as it seems. Out of these 16 groups 6 were food
related, and 9 were health related. Most of the food related groups sold off
hard June - July due to drought concerns, and their charts suggest the
performance of the past few weeks is a bounce from oversold conditions. Health
related groups, while sometimes functioning as a defensive strategy, can also serve
as growth related investments. Another factor helping to mitigate concern is
that utility and alcohol/tobacco groups continued to perform poorly; the
Philadelphia Utility Index fell for the fourth consecutive week, losing 1.4%.
In general, the performance in these three areas supports
the view of a market pausing.
Group Performance:
Apparel related groups continue to perform well, both the Apparel-Shoes
& Rel Mfg group (#103) and the Apparel-Clothing Mfg group (#67) rank
in the top 50 groups on the 5 week price performance list, and the top 32 on
the two week price performance list.
- Ralph Lauren (RL) broke through its 200 DMA Friday 8/17, retested the line on Thursday, and bounced 2% higher off the line this past Friday. While not likely to be the strongest selection from the group, RL does look like it could see $180.
- PVH Corp. (PVH) has an 89.31 pivot out of a cup & handle base. PVH has seen steady increases in institutional sponsorship over the trailing 7 quarters, with the total number of funds increasing from 527 to 770.
Last week's notes pointed out promising price action in auto
related groups. These groups sold off last week with 4 of 5 finishing in the
bottom 50 with an average weekly decline of 3.6%. However, these declines came
in below average volume and 4 of the 5 groups still remain in the top 25 on the
3 week price performance list.
- Westport Innovations (WPRT) was featured last week with a 40.40 buy point. The buy point never triggered and WPRT fell steadily last week until finding support Friday at its 50 DMA, closing at 34.60. If the price action stabilizes early Monday morning speculators might consider a position here with a tight stop just below Friday's intraday low, ~ 33.50.
The Hsehold-Office Furniture group ranks in the top
50 on both the 2 and 5 week price performance lists, and in the MarketSmith
industry group rankings has jumped from #102 to #57 over the past 3 weeks.
- Steelcase (SCS) has a 9.86 pivot out of a 6 month consolidation. SCS is seeing accumulation with a 50 day up/down volume ratio of 1.8 and an accumulation/distribution rating of "B+". Analyst EPS estimates for FY '13 are +31%, FY '14 33%, and SCS's dividend currently yields 3.7%. What's most interesting about SCS is that it is undervalued compared to its industry group peers as measured by forward PE ratios. The industry group has 21 stocks of which 13 have analyst EPS estimates for the next two fiscal years. Examining this subset of 13 stocks SCS has a forward PE of 9.6 for FY '14 vs. an average forward PE of 13.8 for the other 12 stocks. SCS closed Friday at 9.73, an expansion of its forward multiple to the group average yields a price of 13.98 (+44%). SCS releases 2nd quarter earnings Wednesday, September 19 and this could be the catalyst to move shares higher. Analysts expect 20c per share, a significant beat or raising of guidance might get things started.
Energy related groups have had a tough couple of weeks, on
the two week price performance list 6 groups rank in the bottom 50 and only one
group in the top 50. However, the overall percentage declines have so far been
modest, and on the 3 and 5 week price performance energy related groups are
spread fairly evenly over the performance spectrum.
The Energy-Solar group has been on a tear, and is the
top ranked group on the 1, 2, 3, and 5 week price performance lists, and is the
#2 ranked group on the 13 week list showing a gain of 21.5%. However, the group
still shows a 33% decline on the 26 week list. The MarketSmith industry group
rank has improved from #197 (last) to #169 over the trailing 3 weeks.
Another beaten down energy group starting to show a pulse is
the Energy-Coal group. The group ranks #58 on the 5 week list (+5%) but
#189 on the 26 week list (-25.5%). The catalyst for further price improvement
could be investor perceptions on the outcome of the presidential election. Obama
administration policies have been hostile to fossil fuel exploration and production,
but coal especially so. If polling starts to suggest a Romney/Ryan victory in
November the coal group would be a primary beneficiary along with the other
energy groups.
As mentioned in the Market Overview section above Gold broke
out of a descending triangle pattern and volatility squeeze this week as seen
in the chart below:
As this 5 minute chart of the Philadelphia Gold/Silver Index
shows this run began precisely at 2 PM with the release of the FOMC minutes,
which implied additional quantitative easing. The index jumped 4% in the next 3
hours of trading.
As with the Coal group, there could be a political dimension to
the future performance of this asset class. Since the President's campaign
consists of nothing more than television ads calling his opponents
"extreme", a victory would result in zero mandate to govern. An
Obama victory in November would result in kicking the can down the road on
entitlement reform, and truly massive debt accumulation over the next 4 years, events
likely to accelerate gold's ascent. Since the Romney/Ryan ticket is
campaigning with a specific plan to reform entitlements and contain debt, their
victory would likely mute gold's ascent.
- Yamana Gold (AUY) is 1% past a 16.62 pivot out of a 10 week consolidation. The accumulation/distribution rating is a "B+", and over the last 8 quarters institutional sponsorship has increased from 763 to 971 funds. Analyst estimates project FY '13 EPS +44%.
- Silver Standard (SSRI) engages in silver and gold exploration. SSRI saw heavy buying this week, and analysts estimate FY '12 EPS +100%, and FY '13 EPS +163%. MarketSmith's pattern recognition tool shows it climbing the right side of a cup shaped base, but a case could be made for it breaking out of a 12 week consolidation. Regardless of which interpretation you prefer, SSRI is an attractive chart.
Follow up/Review:
The table below follows up on stocks mentioned in the last
two blog posts.
|
Symbol
|
Date Published
|
Price at Publish
|
Current Price
|
Buy Point
|
BP hit?
|
Gain %
|
Comment:
|
|
FEIC
|
8/5/12
|
52.48
|
54.04
|
51.60
|
Y
|
3.0%
|
Low volume pull back last week.
|
|
IPGP
|
8/5/12
|
57.24
|
61.9
|
57.51
|
Y
|
7.6%
|
Modest 0.8% weekly decline, vol increased over
previous wk
|
|
FTK
|
8/5/12
|
9.96
|
11.93
|
9.96
|
Y
|
19.8%
|
Still looks good here
|
|
KOG
|
8/5/12
|
8.16
|
9.17
|
8.16
|
Y
|
12.4%
|
Still looks good here
|
|
BCOR
|
8/5/12
|
15.33
|
15.66
|
16.02
|
Y
|
-2.2%
|
16.02 BP from 8/19 follow up.
|
|
IACI
|
8/5/12
|
53.10
|
51.5
|
52.78
|
Y
|
-3.0%
|
Could be adding a handle to its cup
|
|
KORS
|
8/19/12
|
52.09
|
53.92
|
50.69
|
Y
|
3.5%
|
Spiked higher Friday, +4.4% on volume 19%
above avg.
|
|
VFC
|
8/19/12
|
153.03
|
150.22
|
152.97
|
Y
|
-1.8%
|
Low volume drift as price has fallen back in
the handle.
|
|
CMI
|
8/19/12
|
103.19
|
100.09
|
103.19
|
Y
|
-3.0%
|
"stops at ~ 98.50". Low vol pul back
to support.
|
|
TEN
|
8/19/12
|
31.53
|
30.22
|
31.53
|
Y
|
-4.2%
|
Looks OK here, finished at the top of Friday's
range. 7-8% stop
|
|
FRAN
|
8/19/12
|
34.32
|
34.69
|
33.93
|
Y
|
1.1%
|
Looks good, consolidating around the pivot.
|
|
SCSS
|
8/19/12
|
29.81
|
28.23
|
29.81
|
Y
|
-5.3%
|
Price falls back into handle on low volume.
7-8% stop.
|
|
BECN
|
8/19/12
|
27.61
|
27.87
|
28.00
|
Y
|
-0.5%
|
Looks good, aided by strength in Builder
groups
|
|
CHS
|
8/19/12
|
16.80
|
18.52
|
16.80
|
Y
|
10.2%
|
Beat earnings, sees "strong start"
to 3rd qtr
|
|
FIRE
|
8/19/12
|
51.11
|
52.11
|
51.11
|
Y
|
2.0%
|
Nice price action Friday, stops at ~ 48.00
|
|
SNPS
|
8/19/12
|
31.28
|
33.28
|
31.28
|
Y
|
6.4%
|
Beat earnings, raised guidance.
|
|
MENT
|
8/19/12
|
15.99
|
16.34
|
15.99
|
Y
|
2.2%
|
High vol doji Friday, could pull back here.
Set stops accordingly.
|
|
Avg.
|
2.8%
|
||||||
|
PRLB
|
8/5/12
|
37.89
|
32.64
|
39.08
|
N
|
Heavy selling, a dud for now.
|
|
|
CRZO
|
8/5/12
|
24.67
|
25.2
|
26.50
|
N
|
Hit 26.53 but no volume, still looks good here
|
|
|
Z
|
8/5/12
|
38.63
|
37.89
|
44.00
|
N
|
Drifting, potency of pattern questionable
|
|
|
CRI
|
8/19/12
|
53.43
|
54.41
|
57.27
|
N
|
Still looks attarctive, no pocket pivot yet.
|
|
|
CTB
|
8/19/12
|
20.22
|
19.87
|
19.00
|
N
|
BP "on a pull back towards $19",
keep watching
|
|
|
OSK
|
8/19/12
|
25.22
|
24.72
|
26.34
|
N
|
Keep on the watch list, keep alert set.
|
|
|
WPRT
|
8/19/12
|
39.03
|
34.6
|
40.40
|
N
|
Maybe here at 200 DMA, if yes stops at 33.50
|
|
|
SKUL
|
8/19/12
|
16.66
|
14.65
|
17.76
|
N
|
Cup base has developed a handle, BP now 16.75
|
|
|
HAR
|
8/19/12
|
46.54
|
45.45
|
52.75
|
N
|
Cup base has developed a handle, BP now 46.84
|
|
|
SYMC
|
8/19/12
|
18.01
|
17.73
|
18.85
|
N
|
Cup base has developed a handle, BP now 18.09
|
