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. 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
|
|
Dow Jones Transportation Index
|
-0.6%
|
0.2%
|
0.1%
|
2.9%
|
-1.4%
|
-4.1%
|
|
Philadelphia Utility Index
|
-1.7%
|
0.3%
|
-0.5%
|
1.2%
|
-4.7%
|
1.4%
|
|
FXE euro
|
-0.7%
|
-0.2%
|
-0.8%
|
-0.4%
|
5.1%
|
-2.5%
|
|
KBW Large Cap Bank Index
|
-2.4%
|
-1.5%
|
-4.2%
|
-1.9%
|
6.8%
|
0.8%
|
|
Philadelphia Housing Index
|
-3.0%
|
3.5%
|
-2.4%
|
-3.1%
|
17.8%
|
23.7%
|
|
SP 500
|
-1.5%
|
-1.2%
|
-3.4%
|
-3.3%
|
1.9%
|
0.6%
|
|
DJIA
|
-1.8%
|
-1.7%
|
-3.7%
|
-3.5%
|
0.2%
|
-0.9%
|
|
Russell 1000 Energy Index
|
-2.5%
|
-0.8%
|
-2.3%
|
-3.7%
|
2.2%
|
1.1%
|
|
Russell 2000
|
-0.9%
|
-1.2%
|
-3.5%
|
-4.9%
|
2.2%
|
-1.5%
|
|
Nasdaq Composite
|
-0.6%
|
-1.8%
|
-4.7%
|
-6.0%
|
1.0%
|
-2.6%
|
|
Pboe Oil Service Index
|
-4.3%
|
-0.7%
|
-0.1%
|
-6.1%
|
-2.4%
|
-6.2%
|
|
Philadelphia Gold/Silver Index
|
-1.7%
|
-1.2%
|
-4.6%
|
-6.4%
|
20.4%
|
10.2%
|
|
Philadelphia Semiconductor Index
|
0.6%
|
0.2%
|
-4.2%
|
-7.1%
|
-4.4%
|
-11.7%
|
Last week's Market Overview postulated that we're closer to
the end of the current tech pullback than the beginning. This week there was further
evidence suggesting we are close to a bottom in tech:
- After leading tech lower for the last 6 months the Philadelphia Semiconductor Index gained 0.6% for the week. All three of the MarketSmith semiconductor related industry groups finished in the top 33 of the 1 week price performance list in volume well above average. The Elec-Semiconductor Equip group gained 0.7% in volume 11% above average, the Elec-Semiconductor Mfg group gained 2.1% in volume 26% above average, and the Elec-Semicondctor Fablss group gained 2.1% in volume 31% above average.
- The Nasdaq held support at its 200 day MA last week. Of the four major indexes listed in the table above the Nasdaq had the smallest weekly decline, -0.6% compared to -0.9% for the Russell 2000, -1.5% for the S&P 500, and -1.8% for the DJIA. Yet this slight decline occurred in the heaviest volume of the four indexes at +13% compared to +7% for the Russell 2000 and +4% for the DJIA and S&P 500. This dichotomy suggests buyers are starting to step in.
- Apple missed earnings estimates but fell only 0.9%, suggesting most of the earnings miss was already priced into the stock. At its Friday low Apple was 16.2% off its most recent high, matching the second largest decline the stock has seen since March 2009. Apple begin to rally after finding support very close to its 200 day MA. While this blog is not making a bullish call on Apple, it does appear most of the selling is behind us which is a positive for the rest of the tech sector.
- As demonstrated in the tables below Tech enjoyed 9 groups in the top 50 of the 1 week price performance list vs. 8 in the bottom 50. This is a marked change from last week when there were only 3 in the top 50 and 17 in the bottom 50. On the 2 week price performance list the ratio this week is 6/14 compared to 1/21 last week, another indication buyers are stepping in.
While this is not a tech-specific observation, the
transports have performed very well since this blog first identified a
weakening market in its 9/23 blog post. Since that post 5 weeks ago the Dow Jones Transportation Index has gained 2.9%, and of
MarketSmith's 7 transportation related industry groups 5 of them rank in the
top 33 on the 5 week price performance list. Strength in the transports does
not suggest further market weakness.
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)
|
5
|
11
|
11
|
7
|
8
|
3
|
|
# in the
bottom 50 groups (out of 197)
|
10
|
7
|
4
|
8
|
5
|
15
|
|
28 Technology Oriented Groups:
|
1 wk
|
2 wk
|
3 wk
|
5 wk
|
13 wk
|
26 wk
|
|
# in the
top 50 groups (out of 197)
|
9
|
6
|
1
|
0
|
2
|
1
|
|
# in the
bottom 50 groups (out of 197)
|
8
|
14
|
15
|
20
|
16
|
18
|
|
30 Defensively Oriented Groups:
|
1 wk
|
2 wk
|
3 wk
|
5 wk
|
13 wk
|
26 wk
|
|
# in the
top 50 groups (out of 197)
|
7
|
8
|
8
|
11
|
7
|
13
|
|
# in the
bottom 50 groups (out of 197)
|
5
|
7
|
9
|
5
|
9
|
0
|
As discussed above tech related groups started to show some
positive performance this past week. The table below shows these 9 groups, plus
two that almost made the list:
|
Industry Group
|
Symb.
|
Sector
|
1 Week Gain
|
1 Week Rank
|
|
Elec-Semicondctor Fablss
|
G3676
|
Chips
|
2.1%
|
9
|
|
Elec-Semiconductor Mfg
|
G3677
|
Chips
|
2.1%
|
10
|
|
Computer Sftwr-Design
|
G3575
|
Software
|
1.5%
|
18
|
|
Elec-Scientific/Msrng
|
G3611
|
Electronics
|
1.4%
|
19
|
|
Electronic-Parts
|
G3680
|
Electronics
|
0.9%
|
26
|
|
Elec-Misc Products
|
G3662
|
Electronics
|
0.8%
|
31
|
|
Elec-Semiconductor Equip
|
G3674
|
Chips
|
0.7%
|
33
|
|
Medical-Systems/Equip
|
G3831
|
Medical
|
0.7%
|
36
|
|
Computer Sftwr-Financial
|
G2821
|
Software
|
0.5%
|
42
|
|
Telecom-Fiber Optics
|
G3552
|
Telecom
|
0.2%
|
51
|
|
Computer Sftwr-Desktop
|
G3270
|
Software
|
0.1%
|
52
|
Industry Group
Performance:
Market pullbacks offer an opportunity to identify emerging
industry groups as their strength becomes easier to see against the backdrop of
a falling market. Here are some groups worthy of further attention:
The Machinery-Farm industry group ranks #9 on the 5
week price performance list, #47 on the 13 week list, #58 on the 26 week list,
and yet has an industry group rank of only #108.
- Deere & Co. (DE) has an 89.70 buy point out of what is currently a 36 week consolidation. DE is seeing some accumulation with an Accumulation/Distribution rating of "B" and a 50 day Up/Down volume ratio of 1.6. The relative strength line has broken an 8 month down trend and is now trending higher. DE trades at 11 times earnings and has a 2.2% dividend yield.
The
Leisure-Gaming/Equip industry group has a MarketSmith industry group
rank of #152 and ranks #162 on the 26 week price performance list. However, the
group the group ranks in the top 40 on the 1, 2, 3, 5, and 13 week price performance lists showing
significant price strength over the past 3 months.
- Melco Crown Entertainment (MPEL) is 6% past its 13.56 pivot out of a cup & handle base, a pull back to 14 would provide a buying opportunity. MPEL is under heavy accumulation with a "B+" Accumulation/Distribution rating and a 50 day Up/Down volume ratio of 1.8.
- Bally Technologies (BYI) jumped 5% on Friday in almost 3x average volume after raising guidance and releasing earnings that exceeded consensus estimates. BYI closed Friday at 49.82, and has a 49.69 pivot out of a 25 week flat base. BYI is seeing accumulation with an Accumulation/Distribution rating of "A" and a 50 day Up/Down volume ratio of 1.1.
The Leisure-Movies & Related industry group is #76
in the MarketSmith rankings but is the #8 ranked group on the 5 week price
performance list.
- Lions Gate Entertainment (LGF) is seeing some accumulation with an Accumulation/Distribution rating of "B+" and a 50 day Up/Down volume ratio of 1.2; over the past 9 months institutional sponsorship has increased from 135 funds to 215. FY '14 EPS are forecast to increase +124% to 1.30 per share giving LGF a forward PE of 12.4. LGF looks to have a 16.19 pivot out of a 6 month ascending triangle base.
Over the past 10 weeks the Chemicals-Plastics group
has jumped from #102 to #6 in MarketSmith's industry group rankings.
- Eastman Chemical (EMN) jumped 12.2% Friday in 4x average volume after beating earnings and raising guidance. Eastman's RS rating of 88 is at a new high, and it trades at 11x trailing earnings with FY '12 EPS forecast +11%, and FY '13 forecast +19%.
Bonds/Income:
For readers interested in income TCW Funds published a
market commentary piece last week recommending emerging market currency bonds
suggesting that in addition to paying competitive returns they are likely to
benefit from developed market countries devaluing their currencies. This is a
highly recommended read which you can find here. PCY, EMB and EMLC are three
emerging market bond ETFs to consider.
Charts:
Listed below are this week's charts.
