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
|
|
Philadelphia Housing Index
|
-2.3%
|
-0.3%
|
2.3%
|
13.4%
|
12.1%
|
23.3%
|
|
KBW Large Cap Bank Index
|
-0.4%
|
4.0%
|
6.9%
|
11.0%
|
11.7%
|
23.8%
|
|
Philadelphia Semiconductor Index
|
-1.9%
|
-1.0%
|
2.3%
|
10.7%
|
8.6%
|
25.0%
|
|
Pboe Oil Service Index
|
-1.8%
|
-0.1%
|
1.4%
|
9.8%
|
5.5%
|
19.0%
|
|
Russell 1000 Energy Index
|
-0.6%
|
1.3%
|
2.0%
|
8.3%
|
4.2%
|
12.5%
|
|
Cboe Technology Index
|
-0.4%
|
-0.8%
|
-0.2%
|
8.2%
|
2.0%
|
1.5%
|
|
Nasdaq Composite
|
-1.1%
|
0.7%
|
2.4%
|
7.9%
|
9.4%
|
16.6%
|
|
Russell 2000
|
-1.2%
|
0.9%
|
3.1%
|
7.9%
|
7.4%
|
21.9%
|
|
SP 500
|
-1.1%
|
1.0%
|
2.2%
|
6.1%
|
8.9%
|
17.1%
|
|
Dow Jones Transportation Index
|
-2.3%
|
0.3%
|
2.8%
|
6.0%
|
7.6%
|
26.6%
|
|
DJIA
|
-0.3%
|
1.2%
|
2.2%
|
5.2%
|
9.3%
|
17.6%
|
|
Philadelphia Gold/Silver Index
|
3.2%
|
-7.3%
|
-6.6%
|
-2.2%
|
-26.2%
|
-42.3%
|
|
Philadelphia Utility Index
|
-3.5%
|
-2.9%
|
-5.5%
|
-5.3%
|
4.5%
|
13.8%
|
The markets saw
distribution last week, with a stalling day on Tuesday followed by a solid
reversal/distribution day Wednesday after the release of the FOMC minutes. News on
Thursday that Chinese manufacturing had fallen to its lowest level in 7 months led
to a gap down opening, followed by another on Friday; although on both days
markets pushed back to close nearly flat. For the week the Russell 2000 lost
1.2%, the Nasdaq & S&P 500 1.1%, and the DJIA eased 0.3%.
In other
economic data Wednesday’s existing homes sales report was positive, and
Thursday’s new home sales beat expectations by 29K. New home sales data
suggested a YOY price increase of ~ 15%. Jobless claims continue to fall, and
both the PMI Manufacturing Index and Durable Goods Orders beat consensus
expectations.
The table
immediately below indicates there was very little, if any, defensive rotation
last week; in fact the Philadelphia utility Index got clobbered falling 3.5%. This
lack of defensive rotation, combined with the improved relative performance of
commodity oriented/impacted groups, suggests that while the market may enter a
trading range and/or see increased volatility, a serious pullback is not imminent.
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.
|
30 Commodity
Oriented Groups:
|
1 wk
|
2 wk
|
3 wk
|
5 wk
|
13 wk
|
26 wk
|
|
# in the
top 50 groups (out of 197)
|
10
|
7
|
4
|
6
|
4
|
5
|
|
# in the
bottom 50 groups (out of 197)
|
4
|
7
|
3
|
2
|
12
|
12
|
|
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
|
8
|
7
|
12
|
4
|
5
|
|
# in the
bottom 50 groups (out of 197)
|
11
|
11
|
9
|
5
|
13
|
8
|
|
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
|
8
|
6
|
4
|
8
|
7
|
|
# in the
bottom 50 groups (out of 197)
|
6
|
6
|
9
|
14
|
1
|
4
|
Commodity
oriented/impacted groups performance, especially from the energy sector, is beginning
to improve. As noted above the performance of defensively oriented groups
remains modest.
Industry Group Performance:
Energy: On Monday after the close the
blog tweeted “Strong move in Energy sector today, 12 of 13 groups in top 30 of
the daily price perf. list, numerous groups appear to be breaking out”. For the
week 8 of the sector’s groups finished in the top 50 of the trailing 1 week
price performance report, and 11 of 13 finished in the top half. Over the
trailing five weeks the Pboe Oil Service Index has outperformed
the S&P 500 by 61% (9.8% vs. 6.1%), and the broader Russell 1000 Energy
Index has done so by 37% (8.3% vs. 6.1%).
Over the
past 4 weeks the Energy-Alternative/Other group (G1318) has broken
through a 3-year+ descending trendline in increasing volume. This group
finished the week ranked #1 on the weekly price performance list with a 5.2%
gain, and jumped +37 in MarketSmith’s industry group rankings to #15 overall.
The Oil&Gas-Field
Services group (G1380) fell 1.4% last week, but ranks #15 on the trailing 5
week price performance list with a 14.7% gain. Over the same 5 week period the
groups MarketSmith industry group rank has improved +57 from #84 to #27
overall.
The Oil&Gas-Refining/Mktg
group (G2900) gave back 0.6% for the week but did so in declining volume.
The Oil&Gas-U
S Expl&Prod group (G1310) is fighting to close above resistance.
The Oil&Gas-Integrated
group (G1317), the market cap behemoth of the sector, lags with a MarketSmith rank
of #177 but is less than 2% off a new high.
The Energy-Coal
group (G1319) appears to have put in a bottom and is consolidating. The group finished
#4 on the weekly price performance list with a 3.2% gain, and ranks #38 on the
5 week list with a 11.8% gain. The up/down volume ratio is 1.4, tied with the Oil&Gas-Transport/Pipeline
group (G4922) for the highest in the sector.
Solar (G1320) looks
to be going parabolic.
Sanchez
Energy (SN) blew through resistance on Monday, gaining 7.5% on volume almost 3x
greater than average. SN pulled back the balance of the week to close $0.01 above
its 21.62 resistance line, and back inside its upper Bollinger band, setting up
a nice flag pattern. SN is under
accumulation with a “B” accumulation/distribution rating, 50 day up/down volume
ratio of 1.3, and a 25 day ratio of 2.1. FY ’13 EPS are forecast +539%, and FY ’14
+73% to $2.54 per share, giving SN a forward PE ratio of ~8.5 when using FY ’14
estimates.
Helix Energy
Solutions (HLX) is seeing accumulation with a 50 day up/down volume ratio of 1.4, a 25 day ratio of 2.3, and institutional sponsorship has increased from 446
funds to 483 over the last quarter. Analysts forecast FY ’13 EPS +37%, and FY ’14
+58%. HLX has a 25.49 pivot out of a 13 week consolidation.
MRC Global
(MRC) is a recent IPO from the Oil&Gas-Machinery/Equip group which
is seeing accumulation. MRC has a “B” accumulation/distribution rating,
the 50 day up/down volume ratio is 1.1, and the 25 day ratio is 1.8.
Institutional sponsorship has increased 124 > 135 > 197 > 223 since
coming public, and MRC has a ROE of 20%. Analysts forecast FY ’13 EPS +18%, and
FY ’14 EPS +19%. MRC has a 33.11 pivot out of a cup shaped base.
Dril Quip
(DRQ) is another stock from the Oil&Gas-Machinery/Equip group which
is seeing accumulation. DRQ has an “A” accumulation/distribution rating, 50 day
up/down volume ratio of 1.5, and a 25 day ratio of 1.8; and fund sponsorship
has increased 430 > 463 > 470 > 481 over the last 4 quarters. Analysts
forecast FY ’13 EPS +25%, and FY ’14 EPS +29%. DRQ is 3% past a 88.12 pivot.
Dresser Rand
(DRC) has an “A-” accumulation/distribution rating, a 50 day up/down volume
ratio of 1.5, and a 25 day ratio of 3.3. Institutional sponsorship has
increased 450 > 462 > 477 > 495 over the last 4 quarters. Analysts
forecast FY ’13 EPS +40%, FY ’14 +29%, and DRC has an ROE of 18.2%. DRC is 3%
past a 61.97 pivot out of a double bottom base.
Tesoro (TSO)
is a constituent of the Oil&Gas-Refining/Mktg group. TSO has a “B-” accumulation/distribution rank, 50 day up/down
volume ratio of 1.2, but a 25 day ratio of 1.9. Institutional sponsorship has
been growing by leaps, 701 > 791 > 827 > 899 over the last 4 quarters.
TSO is 5% past a 58.52 pivot out of a cup & handle base.
Oasis
Petroleum (OAS) is out of the Oil&Gas-US Expl&Prod group. OAS
has a”B-” accumulation/distribution rating, a 50 day up/down volume ratio of 1.0,
but a 25 day ratio of 1.8, and a ROE of 26%. Institutional sponsorship gains have been strong,
increasing 363 > 387 > 437 > 481 over the last 4 quarters. Analysts
forecast FY ’13 EPS +33%, and FY ’14 +29% OAS currently trades at 16 times
earnings, and has a 39.78 pivot out of a 10 week consolidation.
Chesapeake
Energy (CHK) may benefit from increasing natural gas prices and is seeing some
very heavy short term accumulation. CHK has a “B+” accumulation/distribution
rating, and while the 50 day up/down volume ratio is a modest 1.0, the 25 day
ratio is extremely strong at 2.6. Analysts forecast FY ’13 EPS +144%, and FY ’14
+38%. CHK has a 22.97 pivot out of a cup shaped base, but aggressive traders
might consider a position at current levels.
Cabot Oil
& Gas (COG) has posted +30% sales & EPS growth for the past two
quarters. COG is showing some accumulation with a “B+”
accumulation/distribution rating and steady institutional sponsorship gains:
925 > 955 > 1016 > 1074 over the past 4 quarters. The up/down volume
ratio is average however, with the 50 day at 1.0 and the 25 day at 1.1.
Analysts forecast FY ’13 EPS +129%, FY ’14 +72%. COG is just $0.43 shy of a
71.39 pivot out of a 6 week flat base.
Watchlist: Here are a few other names
for the watch list:
Electronics
For Imaging (EFII) is showing strong short term accumulation, and appears ready
to move higher out of a Bollinger Band volatility squeeze. EFII’s accumulation/distribution
rating is “B+”, its 50 day up/down volume ratio is 1.3, but its 25 day ratio is
a strong 2.1. Sponsorship has increased 256 > 279 > 291 over the past 3
quarters.
This TC2000 chart shows the Bollinger Band squeeze:
Jazz
Pharmaceuticals (JAZZ) was featured in the March 10 blog post, and is finally
moving past its pivot with some volume. JAZZ is seeing very strong accumulation
with a “A-” accumulation/distribution rating, a 50 day up/down volume ratio of
1.5, and a 25 day ratio of 2.4. Institutional sponsorship has increased 373
> 410 > 413 > 448 over the past 4 quarters. JAZZ has a ROE of 44%, an
EPS growth rate of 111%, and a trailing PE of 12. JAZZ is currently 6% past a
60.20 pivot and is outside its upper Bollinger Band, so look for it to pull
back a little, or at least consolidate, before establishing or adding to a
position.
Nxp
Semiconductors (NXPI) is seeing very strong accumulation with a 50 day up/down
volume ratio of 1.2, and a very strong 25 day ratio of 2.2. Institutional
sponsorship has increased 202 > 284 > 309 > 410 over the past 4
quarters. Analysts forecast FY ’13 EPS +52%, FY ’14 +24%. NXPI trades at 12x
earnings and has a 31.01 pivot out of a cup & handle base.
Hovnanian
(HOV) is under strong short term accumulation. HOV has a “B+”
accumulation/distribution rating, the 50 day up/down volume ratio is only 1.1,
but the 25 day ratio is very strong at 2.3.
Aceto Corp
(ACET) average daily trade is only 111K, but has an attractive chart for those
comfortable holding a thinner name. Accumulation/distribution rating “B+”, 50
day up/down 1.1, 25 day 1.5. FY ’13 EPS forecast +35%, FY ’14 +14%, PE 14. ACET
is 3% past its pivot out of a flat base.
On
Assignment (ASGN) was featured in the blog numerous times last December, and
has set up again. ASGN has a “B” accumulation/distribution rating, a 50 day
up/down volume ratio of 1.2, and a 25 day ratio of 2.0. ASGN is 2% past a 26.09
pivot out of a consolidation. However, it’s a third stage base and institutional
sponsorship has been stagnant the last 3 quarters, 299 > 298 > 300, so
watch your stops.
Eagle
Materials (EXP) is 4% past its pivot out of 2nd stage consolidation.
EXP is seeing very strong accumulation with a 50 day up/down volume ratio of 1.7,
and a very strong 25 day ratio of 4.2. Institutional sponsorship has increased 310
> 358 > 396 > 401 over the past 4 quarters. Analysts forecast FY ’13 EPS
+79%, FY ’14 +52%.
Ocwen
Financial (OCN) was pushed back 2% below its 42.07 pivot by last week’s market
action. OCN is seeing strong accumulation with a 50 day up/down volume ratio of
1.4, and a very strong 25 day ratio of 3.3. Institutional sponsorship has
increased 326 > 373 > 485 > 496 over the past 4 quarters. Analysts
forecast FY ’13 EPS +237%, FY ’14 +21%.
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