Listed
below are notes from the author's weekly analysis.
Notice: the Sector Trends blog will not publish the
next two weekends, but will return
Sunday, July 21.
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 1 week performance. The
green and red shading denotes relative performance +/- to the SP 500 for the
time period in question.
Index
|
1 Week Gain
|
2 Week Gain
|
3 Week Gain
|
5
Week Gain
|
13 Week Gain
|
26 Week Gain
|
Philadelphia Utility Index
|
3.0%
|
1.4%
|
1.1%
|
-2.6%
|
-3.9%
|
8.9%
|
KBW Large Cap Bank Index
|
2.1%
|
2.1%
|
-0.3%
|
0.9%
|
9.1%
|
21.4%
|
Philadelphia Semiconductor Index
|
1.6%
|
0.6%
|
-0.6%
|
1.5%
|
7.3%
|
24.3%
|
Philadelphia Housing Index
|
1.5%
|
-5.8%
|
-5.9%
|
-12.2%
|
-6.8%
|
6.8%
|
Russell 2000
|
1.4%
|
-0.4%
|
-1.0%
|
-0.7%
|
2.7%
|
17.5%
|
Nasdaq Composite
|
1.4%
|
-0.6%
|
-1.9%
|
-1.6%
|
4.2%
|
15.0%
|
Dow Jones Transportation Index
|
1.0%
|
-2.1%
|
-2.7%
|
-3.5%
|
-1.3%
|
18.3%
|
SP 500
|
0.9%
|
-1.2%
|
-2.2%
|
-2.6%
|
2.4%
|
14.5%
|
DJIA
|
0.7%
|
-1.1%
|
-2.2%
|
-2.6%
|
2.3%
|
15.2%
|
Pboe Oil Service Index
|
0.7%
|
-0.1%
|
-1.9%
|
-2.5%
|
3.0%
|
17.8%
|
Russell 1000 Energy Index
|
0.2%
|
-1.4%
|
-3.1%
|
-3.6%
|
-1.4%
|
10.7%
|
Cboe Technology Index
|
-1.0%
|
-3.4%
|
-5.3%
|
-4.5%
|
-5.0%
|
0.3%
|
Philadelphia Gold/Silver Index
|
-1.4%
|
-12.1%
|
-14.6%
|
-10.4%
|
-33.6%
|
-43.9%
|
The markets
rebounded modestly last week led by the Russell 2000 and Nasdaq each gaining 1.4%
followed by the S&P 500 +0.9%, and the DJIA +0.7%. The Russell 2000
recaptured its 50 day MA, while the Nasdaq lies 0.88 points below its. The
S&P 500 and DJIA lie ~ 1% below their respective 50 day averages.
While it's a
positive the more speculative indexes led in price action, volume sent a mixed
signal. As the markets slowly climbed each day's volume came in lower than the
day that proceeded it, until Friday. For a while it appeared Friday would
follow the same pattern, but the markets sold off hard in the last 30 minutes
in very heavy volume. While there was some index rebalancing Friday, at the
least the action speaks to skittishness on the part traders, and hence the need
for caution in this environment.
Another
caveat was the absence external shocks to the market as reflected in the
paucity of negative headlines from foreign markets. A test for the market will
be found in how it reacts to the next negative headline from overseas; this coming Monday's
release of China's manufacturing PMI could be one such test.
On a bullish
note, last week's blog featured 22 charts. All 22 were positive on the week,
with an average gain of 4.4%.
Economic
data was for the week was largely positive. On Monday the Dallas Fed Mfg.
survey showed an increase to +6.5 vs -10.5 the previous month. On Tuesday
Durable Goods, the Case-Shiller HPI, Richmond Fed Mfg. survey and Consumer
Confidence all exceeded expectations. Thursday's jobless claims came in flat to
expectations, but the Personal Income and Outlays report showed a 0.5% M/M
increase in income vs. a consensus expectation of 0.2%. The largest discordant
note was Wednesday's unexpected downward revision of 1st quarter GDP, although
some saw this as a positive in that it could delay the withdrawal of the Fed's
QE.
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. The 2 and 5
week trends indicate a modest preference for technology oriented stocks.
30
Commodity Oriented Groups:
|
1
wk
|
2
wk
|
3
wk
|
5
wk
|
13
wk
|
26
wk
|
#
in the top 50 groups (out of 197)
|
4
|
5
|
3
|
1
|
3
|
6
|
#
in the bottom 50 groups (out of 197)
|
13
|
12
|
14
|
11
|
15
|
13
|
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
|
10
|
5
|
12
|
6
|
4
|
#
in the bottom 50 groups (out of 197)
|
8
|
4
|
7
|
4
|
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)
|
7
|
3
|
7
|
5
|
6
|
10
|
#
in the bottom 50 groups (out of 197)
|
8
|
5
|
1
|
4
|
2
|
4
|
Industry Group Performance:
Networking: Last week's analysis highlighted
short term price strength in the Computer-Networking group (G3574), and
featured charts of SSNI +16.8%, RKUS +5.8%, and XXIA +3.4%. SSNI is probably
due for a rest here, but RKUS and XXIA look like they will work themselves
higher over time.
Allot Communications (ALLT) gained 15.3% for
the week and looks like it wants to start work on the right side of a cup
shaped pattern. ALLT is seeing strong accumulation with an "A-" A/D
rating, and a 50 day up/down volume ratio of 1.9. Interestingly, the A/D rating
was "A-" before last
week's 15.3% gain.
Leisure Products: The Leisure-Products
group (G3949) is ranked #86 in MarketSmith's industry group rankings, yet ranks
#51 on the 5 week price performance list, and #44 on the 26 week list.
As readers
have probably noticed, luxury oriented brands and retailers have done very well
over the past 6 months. Tumi Holdings (TUMI) is a recent IPO that looks like it
wants to join that trend. TUMI is showing signs of serious accumulation with a
"B+" A/D rating, 50 day up/down volume ratio of 1.9, and a 25 day
ratio of 1.8. Institutional sponsorship has increased 168 > 202 > 235
over the last 3 quarters, and analyst's project FY '13 EPS +47%, and FY '14
+25%. ROE is 24%. TUMI Looks like a buy on a break higher through this
descending trend line:
Nautilus
(NLS) is another name from the group showing strong accumulation. A/D rating is
"B+", and while the 50 day up/down volume ratio is only 1.3, the 25
day ratio is a hot 2.0 and sponsorship increased from 56 to 74 funds over the
last quarter. ROE is 28%, and analyst's project FY '13 EPS +44%, FY '14 +31%.
NLS trades at 20 times earnings, and its 99 RS rating is hitting a new high.
Healthcare: The Medical-Generic
Drugs group (G8064) has a MarketSmith industry group rank of #80 , yet ranks
#11 (+15.2%) on the trailing 13 week price performance list. The Medical-Managed
Care group (G8061) is ranked #1 on
the trailing 3 week price performance list with a 7% gain, and over the same
period of time has jumped +51 in MarketSmith's industry group rankings to #26
overall.
Actavis
(ACT) is under accumulation with a "B+" A/D rating and a 50 day
up/down volume ratio of 2.3. Relative strength is hitting a new high as it
breaks above this descending trend line:
This TC2000
chart shows ACT in a volatility squeeze:
Centene
(CNC) has relative strength and price hitting a new high as it flirts with its
pivot out of a 6 week flat base. CNC's A/D rating is "B+" and its 50
day up/down volume ratio is 1.8. Analysts forecast FY '13 EPS +117%, FY '14
+30%.
Health Net
Inc. (HNT) is a managed care provider with relative strength at a new high and
showing significant buying over the past week and a half. HNT's A/D rating is
"B", and its 50 day up/down volume ratio is 1.5. Analysts forecast FY
'13 EPS +647%, FY '14 +21%. HNT has a 32.79 pivot out of an oddly shaped cup
& handle pattern.
Software: Last week's analysis highlighted
the improving performance of software related groups, and that continued this
past week as 9 of 10 groups finished the week with a gain, and 7 of 10 groups
ranked in the top 60 of the trailing 1 week price performance list.
Demandware
(DWRE) was featured last week and has gained 25% in less than 3 weeks after
breaking out of a double bottom base, triggering the 8 week hold rule. Weekly
chart below:
Jive
Software (JIVE) has been featured here numerous times over the past month and
has cleared it 5% buy zone. Weekly chart:
Verint
(VRNT) was featured in the June 9 analysis and appears ready to break higher:
Qualys Inc.
(QLYS) is very thin with a 50 day average volume of only 145K, but appears
ready to break into new highs:
Intralinks (IL)
looks like it's ready to leave purgatory. IL has an "A" A/D rating,
the 50 day up/down volume ratio is 1.7, and sponsorship has increased 122 >
136 > 155 > 177 over the last 4 quarters. Weekly chart below:
Banks: Last week's analysis highlighted
regional banks, and that area of the banking sector continued to perform well
with all of the regional groups finishing in the top half of the 1 week price
performance list.
BBCN Bancorp
(BBCN) was a top performing choice from last week gaining 7.2%. BBCN is now 2%
past its pivot out of a 14 week flat base:
Hilltop
Holdings (HTH), another repeat from last week remains in its volatility
squeeze:
First
Republic Bank (FRC) is under very strong accumulation with "B" A/D
rating, 50 day up/down volume ratio of 1.6, and sponsorship increases of 380
> 431 > 508 > 533 over the trailing 4 quarters. FRC looks like a buy
here at current price levels.
Yield: Recent Sector Trends blog posts
have mentioned the rotation from yield to growth, and documented the
underperformance of dividend paying stocks. While over time the blog expects
this shift to continue, yield paying equities gained last week and may have hit their
nadir in the short term. Of the 2100 stocks tracked by the sector Trends blog, last week equities
yielding 3-8% gained 2.36% compared to 1.96% gain for those with no dividend.
Utility related groups also outperformed with all 4 groups
finishing in the top half of the trailing 1 week price performance list, and 3
of the groups finishing in the top 38. The Finance-Property Reit group
(G6730) finished #13 with a 3.6% gain, and the Finance-Publ Inv
Fd-Bond group (G6723) finished #50 with a 2.3%
gain.
Kraft Foods (KRFT)
yields 3.4% and has had moved off support at its 50 day MA twice over the past
4 weeks. A/D is "B", 50 day up/down volume 1.8, ROE 19%, and RS is at
a new high ahead of price.
Big 5
Sporting Corp (BGFV) combines growth with a 1.8% dividend yield. BGFV is
showing signs of heavy accumulation with an "A" A/D rating and a 50
day up/down volume ratio 2.9. Last week's 13.6% gain suggests it might rest for
a bit. Weekly chart:
RV's: The May 12th blog post noted the
following: "The Bldg-Mobile/Mfg & Rv
industry group (G3791) ranks #180 in MarketSmith's industry group rankings but
is demonstrating strong short term price performance. The group ranks in the top
50 of the trailing 1, 2, 3 & 5 week price performance lists, coming in at
#34 on the 5 week list with a 9.4% gain. The group has a 50 day up/down volume
ratio of 1.4, ranking #33 in this metric out of 197 groups." Since
then the group has jumped in MarketSmith's industry group rankings +122 from
#180 to #58, has an "A-" A/D rating, and the up/down volume ratio has
held steady at 1.4.
Winnebago
Industries (WGO) was highlighted in the May 12th blog post: "[WGO] is one for the watch list. WGO is currently
working on the right side of a cup shaped base, but shows significant
distribution on the left side. This distribution appears to be the result of
their filing to sell $35M in stock on April 4. Despite the distribution
institutional sponsorship shows steady increases over the last 4 quarters, 204
> 208 > 221 > 248. Recent EPS estimates reflect positive revisions,
with FY '13 EPS forecast +261%, FY '14 +21%."
In the
interim WGO gained 4.9% and now stands 1% past the 20.83 pivot out of a stage 1
cup & handle base. RS 91, EPS 93, 50 day up/down volume ratio 1.8.
Charts: The following charts look
attractive:
Euronet
Worldwide (EEFT) is seeing significant accumulation with an "A" A/D
rating, 50 day up down volume ratio of 2.2, and sponsorship increases of 221
> 239 > 253 over the last 3 quarters. ROE 16%. EEFT looks attractive at current
levels.
Mastec (MTZ)
was featured in the December 30, 2012 blog post with a 24.40 buy point. MTZ has
gained 34.8% since, and is setting up again. MTZ has a 33.97 pivot out of a 6
week flat base, but the low volume suggests it might make one more trip back
towards the 50 day for a better entry. Sponsorship has ramped nicely over the
trailing 4 quarters 272 > 316 > 369 > 392.
Priceline
(PCLN) shows RS hitting a new high while it works its way through this 6 week
flat base. Some caution is in order as MarketSmith's pattern recognition identifies
it as a fourth stage base. Pivot ~ 847.
Flotek
Industries (FTK) was featured in the January 20, 2013 blog post at 12.94 coming
out of a 3 weeks tight formation. FTK saw a huge, sustained volume moving off its
50 day average Wed - Fri of last week, and briefly pushed a few pennies into
new highs before participating in the sell off over the last half hour of
Friday afternoon. FTK shows strong signs of accumulation with a "B+"
A/D rating and a 50 day up down volume ratio of 1.9, but fund sponsorship has
been stagnant over the past 4 quarters 198 > 201 > 192 > 200 sounding
a cautionary note. FTK could be a buy on a move back over 18.20.
Chipmos
Technologies (IMOS) was highlighted here 4 weeks ago at 18.24, since gaining
6%. IMOS looks like it's moving higher out of this volatility squeeze:
Overstock.com
(OSTK) is under very heavy accumulation with an "A" A/D rating and a
50 day up/down volume ratio of 2.0. OSTK gained 8.9% last week, and looks to be
moving higher out of a volatility squeeze.
This TC2000
chart shows the volatility squeeze:
