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
|
KBW Large Cap Bank Index
|
1.2%
|
0.8%
|
5.2%
|
8.9%
|
13.8%
|
26.9%
|
Cboe Technology Index
|
1.6%
|
1.2%
|
0.8%
|
6.8%
|
4.7%
|
1.8%
|
Philadelphia Semiconductor Index
|
1.5%
|
-0.4%
|
0.6%
|
6.5%
|
10.2%
|
25.2%
|
Nasdaq Composite
|
-0.1%
|
-1.2%
|
0.6%
|
5.4%
|
9.0%
|
14.8%
|
Russell 2000
|
0.0%
|
-1.2%
|
0.9%
|
5.2%
|
7.6%
|
19.7%
|
Russell 1000 Energy Index
|
-1.4%
|
-1.9%
|
0.0%
|
3.6%
|
3.2%
|
11.7%
|
SP 500
|
-1.1%
|
-2.2%
|
-0.2%
|
3.1%
|
7.4%
|
15.2%
|
Pboe Oil Service Index
|
-2.2%
|
-4.0%
|
-2.3%
|
3.1%
|
5.0%
|
16.1%
|
Dow Jones Transportation Index
|
-1.6%
|
-4.0%
|
-1.3%
|
2.8%
|
5.1%
|
22.9%
|
DJIA
|
-1.2%
|
-1.6%
|
0.0%
|
2.7%
|
7.3%
|
16.0%
|
Philadelphia Housing Index
|
-3.0%
|
-5.3%
|
-3.4%
|
1.9%
|
8.2%
|
18.4%
|
Philadelphia Gold/Silver Index
|
6.7%
|
10.1%
|
-1.1%
|
0.9%
|
-19.5%
|
-37.0%
|
Philadelphia Utility Index
|
-3.4%
|
-6.7%
|
-6.1%
|
-9.0%
|
0.2%
|
6.1%
|
Last week
the market picked up 2 more distribution days on the Nasdaq, and 3 on the
S&P 500, giving each index 4 and 5 distribution days respectively over the
trailing 2 week period. For the week the DJIA led the major indexes in decline
with a 1.2% loss, followed by the S&P 500 giving back 1.1%. The more
speculative indexes, however, were flat with the Nasdaq giving back a microscopic
-0.1%, and the Russell 2000 finishing essentially flat.
One
publication believes the elevated
distribution day count has resulted in an "uptrend under
pressure". While normally higher
distribution day counts are indicative of a weakening market, Sector
Trend's analysis suggests a more accurate description of what we are seeing is
a market under rotation. Normally
with an elevated distribution day count you see a rotation into defensive names;
what we are seeing here is a rotation from yield to growth, with a preference
for tech. This is a positive for the market going forward, not a negative.
Note in the
table above the weekly performance of the Cboe Technology Index
+1.6%, the Philadelphia Semiconductor Index +1.5%, supported by banking with
the KBW Large Cap Bank Index +1.2%, while the Utility index fell 3.4%. Those
performances do not reflect a market on the cusp of a pullback.
Neither does last week's industry group performance. 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. Tech groups outperformed by a wide margin last week, while
defensively oriented groups struggled. If the market were going into correction, one would not expect to
see tech groups leading in a week with two distribution days.
30 Commodity
Oriented Groups:
|
1 wk
|
2 wk
|
3 wk
|
5 wk
|
13 wk
|
26 wk
|
# in the
top 50 groups (out of 197)
|
5
|
5
|
6
|
5
|
4
|
3
|
# in the
bottom 50 groups (out of 197)
|
9
|
4
|
8
|
2
|
10
|
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)
|
16
|
14
|
9
|
15
|
4
|
6
|
# in the
bottom 50 groups (out of 197)
|
1
|
4
|
3
|
5
|
8
|
5
|
30 Defensively
Oriented Groups:
|
1 wk
|
2 wk
|
3 wk
|
5 wk
|
13 wk
|
26 wk
|
# in the
top 50 groups (out of 197)
|
4
|
5
|
5
|
5
|
8
|
7
|
# in the
bottom 50 groups (out of 197)
|
12
|
13
|
10
|
15
|
6
|
8
|
The move from yield to growth is further demonstrated in the SPDR
sector ETF data table below, sorted high to low based on one week price
performance. The top six yielding ETFs are highlighted in yellow, and the
bottom six price performers in red; note the almost perfect correlation between the two. The
top eight performers are highlighted in green.
Symbol
|
Name
|
Yield
|
1 Week Gain
|
2 Week Gain
|
3 Week Gain
|
5 Week Gain
|
XSD
|
Spdr
S&P Semiconductor
|
0.6
|
3.0%
|
1.1%
|
2.7%
|
12.6%
|
KBE
|
Spdr
S&P Bank Etf
|
1.9
|
1.1%
|
0.1%
|
3.7%
|
7.8%
|
XBI
|
Spdr
S&P Biotech Etf
|
0.2
|
0.8%
|
0.9%
|
3.7%
|
4.6%
|
KIE
|
Spdr
S&P Insurance Etf
|
1.9
|
0.6%
|
-1.5%
|
-0.5%
|
2.9%
|
XLF
|
Spdr
Financial
|
1.5
|
0.6%
|
-0.6%
|
3.1%
|
6.8%
|
KRE
|
Spdr
S&P Regional Bank
|
1.7
|
0.4%
|
-0.5%
|
2.6%
|
6.5%
|
XRT
|
Spdr
S&P Retail Etf
|
1.3
|
0.0%
|
-0.2%
|
1.5%
|
6.3%
|
XLK
|
Spdr
Technology
|
1.7
|
-0.1%
|
-1.7%
|
0.2%
|
5.4%
|
XLI
|
Spdr
Industrial
|
2.0
|
-0.4%
|
-1.4%
|
0.8%
|
5.6%
|
XME
|
Spdr
S&P Metals & Mining
|
1.6
|
-0.4%
|
1.0%
|
-2.5%
|
4.2%
|
XLB
|
Spdr
Materials
|
2.2
|
-0.7%
|
-2.3%
|
-0.7%
|
3.6%
|
XPH
|
Spdr
S&P Pharmaceuticals
|
1.5
|
-0.9%
|
0.2%
|
2.5%
|
5.5%
|
XOP
|
Spdr
S&P Oil & Gas Expl
|
1.2
|
-1.1%
|
-1.3%
|
1.4%
|
6.2%
|
XLY
|
Spdr
Consumer Discretnry
|
1.4
|
-1.2%
|
-2.5%
|
-1.2%
|
3.4%
|
XLE
|
Spdr
Energy
|
1.7
|
-1.5%
|
-2.0%
|
0.3%
|
4.3%
|
PSK
|
Spdr
Wells Fargo Pfd Stk
|
6.3
|
-1.6%
|
-1.7%
|
-2.3%
|
-1.0%
|
XES
|
Spdr
S&P Oil & Gas Equip
|
0.7
|
-1.8%
|
-3.2%
|
-1.5%
|
5.9%
|
XLV
|
Spdr
Health Care
|
1.7
|
-2.0%
|
-2.0%
|
-0.1%
|
1.2%
|
XHB
|
Spdr
S&P Homebuilders
|
0.8
|
-2.6%
|
-4.7%
|
-3.2%
|
1.3%
|
XLU
|
Spdr
Utilities
|
3.9
|
-3.0%
|
-6.5%
|
-5.4%
|
-8.1%
|
XLP
|
Spdr
Consumer Staples
|
2.7
|
-4.0%
|
-4.5%
|
-2.7%
|
-2.1%
|
RWX
|
Spdr Dj
Intl Real Est
|
6.5
|
-4.5%
|
-9.9%
|
-10.3%
|
-9.2%
|
RWO
|
Spdr Dj
Global Real Est
|
3.8
|
-4.9%
|
-9.1%
|
-8.6%
|
-6.6%
|
RWR
|
Spdr Dj
Reit
|
2.8
|
-5.1%
|
-8.4%
|
-6.8%
|
-4.1%
|
The blog's
market outlook remains the same as last week, "while the market may enter
a trading range and/or see increased volatility, a serious pullback is not
imminent." That said, income focused sectors of the market may yet have more downside in front of them.
Industry Group Performance:
Tech: The following 16 charts are pulled from
the technology super sector referenced in the industry group performance
table above.
Bazaarvoice
(BV) offers a Software
as a Service (SaaS) product allowing retailers and brands to obtain and use shopper-generated
reviews. Their client list is extensive, including companies such as Best Buy,
Dell, Adidas, CarMax, Costco, Kohls and numerous others. BV is 63% off its 52
week high, but has built a bottom over the past 5 months, and is now seeing
accumulation. The
accumulation/distribution rating is "B+", the 50 day up/down volume
ratio is a modest 1.0, but the 25 day ratio is a very strong 3.4. Sales have
increased +63% > +61% > +54% > +55% over the trailing 4 quarters. Buy
point is a move over 8.06 with volume.
Xilinx (XLNX) is 3% past its
pivot out of a 12 week flat base. Accumulation/distribution rating of "A-",
50 day up/down volume ratio of 1.4, but a
25 day ratio of 2.7. ROE 17%.
Invensense (INVN) is a fabless
semiconductor company seeing accumulation. The accumulation/distribution rating
is a "B+", 50 day up/down
volume ratio is 1.5 and the 25 day ratio is 2.5. Institutional sponsorship has
increased 172 > 188 > 194 > 220 over the past 4 quarters, and analysts
forecast FY '13 EPS +20%, FY '14 +26%. ROE 30%. INVN has a 13.13 pivot out of a
15 week cup & handle base.
Magnachip Semiconductor (MX) is
1% past an 18.25 pivot out of a 13 week consolidation. MX is seeing accumulation with an accumulation/distribution
rating of "B", 50 day up/down
volume ratio of 1.4 and a 25 day ratio of 2.2. ROE 35%.
Yandex (YNDX) has fallen back inside the 5%
buy zone of an oddly shaped cup base. Accumulation/distribution
rating of "A+", 50 day up/down
volume ratio of 1.3, but a 25 day ratio of 1.9. Institutional sponsorship
increases of 245 > 273 > 303 > 365 over the last 4 quarters. ROE 27%. Analysts
forecast FY '13 EPS +31%, FY '14 +26%.
Chipmos Technologies (IMOS) is
up about 75% over the past 2 1/2 months, and as you might expect after such a
run shows monster accumulation: accumulation/distribution rating of "A+",
50 day up/down volume ratio of 2.9, and a
25 day ratio of 3.1. IMOS trades at 13x earnings, and analysts forecast FY '13
EPS +107%, FY '14 +26% (2.24); giving IMOS a forward PE of ~ 8 when using FY
'14 estimates. IMOS has just completed a 3 weeks tight formation on the weekly
chart:
Nxstage Medical (NXTM) is a
medical device company whose primary product, the NxStage System One, is a portable dialysis machine that can be used by lay people at home. NXTM is 18% off its
52 week high, and is almost 50% off its all time high, but has seen strong
price gains in heavy volume since announcing 1st quarter results May 2. NXTM Looks like its approaching resistance at
~14.75 area, but it's worth keeping on your watch list to see if it can
consolidate before making a move higher.
Electronics For Imaging (EFII) broke
out of the volatility squeeze shown in last week's blog, gaining 3.6% on the
week. EFII still looks good here, 1% past its 27.65 pivot out of a 5 week flat
base. Accumulation/distribution rating of "A-", 50 day up/down volume ratio of 1.5 and a 25
day ratio of 1.6.
Infoblox
(BLOX) was featured in the 4/28 blog and has since gained 8.6% and is 6% past
it's pivot (but not without a little whipsaw!). Another distribution day or two
next week might pull it back into the 5% buy zone.
Nxp
Semiconductors (NXPI) was featured in last week's blog post, and picked up 4%
on the week. NXPI is seeing very strong accumulation with a "B+" accumulation/distribution
rating, a 50 day up/down volume ratio of
1.5, and a 25 day ratio of 1.9. 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 fell 1% below its pivot on
Friday after breaking out on Thursday.
Tangoe Inc.
(TNGO) was a hot stock before collapsing last August. But time heals all
wounds, and TNGO looks poised to move higher out of a 15 week cup & handle base. TNGO is
seeing very strong accumulation with a "A-" accumulation/distribution
rating, a 50 day up/down volume ratio of
2.0, and a 25 day ratio of 3.1. Analysts forecast FY ’13 EPS +38%, FY ’14 +25%.
TNGO trades at 27x trailing earnings, and has 8 consecutive quarters of +50%
EPS growth, and +30% sales growth. TNGO has a 15.24 pivot.
Silicon
Graphics (SGI) has a "B" accumulation/distribution rating, a 50 day up/down volume ratio of 1.2,
and a 25 day ratio of 2.1. Institutional sponsorship has increased over the
past quarter from 170 to 206 funds. Analysts forecast FY '13 EPS +167%, and FY
'14 +225%. SGI broke out of a cup & handle base on Friday, and soared 5%
past the pivot before falling back through the course of the day to finish
+2.4%, and 1% past the pivot, volume was nearly 3x average.
Mako
Surgical (MAKO) is another fallen star from early 2012 that has put in a solid
bottom and is starting to see accumulation. Although MAKO is ~ 73% off its 2012
high, it has an "A-" accumulation/distribution rating, a 50 day up/down volume ratio of 1.7,
and a 25 day ratio of 2.3. MAKO looks like a buy above 12.50, with a secondary
but point at 13.45.
Atmel (ATML)
broke higher out of a 14 week consolidation on Thursday, gaining 6.2% in volume
43% above average. ATML is 5% past its buy point, but a little more weakness
next week could pull it closer in. Accumulation/distribution rating of "B-", 50 day up/down volume ratio of 1.0 but a 25
day ratio of 1.5.
Checkpoint Software (CHKP) is showing
accumulation with an accumulation/distribution rating
of "B+", 50 day up/down volume
ratio of only 1.0, but a 25 day ratio of 2.7. ROE 21%. CHKP has a 51.61 pivot
out of a cup & handle base.
The following names have various flaws but are worthy of having on a watch list to see if the charts become more constructive: TER, LSI, PWRD, OPEN, SAPE,
MR, SWKS, GA, NXTM, IDTI, SPIL, HIMX, CODE, LOGM, SPLK, IACI, MPWR, ENTG, MDRX,
XXIA, SINA.
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