Weekly Sector Report | 10/29/10

We closed October without any of the oft-anticipated fireworks that define this transition month into 4th quarter. The total stock market index was up .13%--we can call that flat.  Below are the 24 major Sectors and their relative performance.


As is usual, I have prepared a chart book in PDF form for your use with the weekly, daily, and monthly (since it is month end charts) for each of the sectors listed above.  You can downoad it here. It's a large file, so be patient.
Below is a weekly chart of the total stock market index.  I like to view this chart because it eliminates the bias of small, large, mid-cap, tech, industrials weighting that is evident in the other indices. I also like to look at the weekly to eliminate some of the daily noise.


We've a string of positive bars--9 weeks now.  With elections this week, perhaps the market will give us its own version of the move  9 1/2 Weeks?  As we've repeatedly seen, when the market gets to critical junctures, the news flow is the major impetus for the direction up or down--and last week was an example of much activity but very little direction although the sectors had quite a bit of push and pull (which is why I look at them).

Weekly Sector Report

Another week marked by some sector rotation juiced by a strengthening dollar.   Here's a graph of the major 24 sectors (CLICK!):

Travel and Leisure's oomph was due to the strength in Airlines, the highest performing industry.
Here's a chart of the the Total Stock Market (CLICK!)

The last rally that formed the top of the much hyped head in a potential H&S pattern developed over a period of 8 weeks prior to correcting.  We've just completed the 8th week of consecutive, positive weekly close on the broad market.  With earnings season upon us, watching how the market responds to news will be important. The volume over this last 8 weeks has been lower than the previous run up to the last high as well as volume from the same time last year.  While I'm not making any predictions, I would surmise that given this run up combined with the overall overbought nature of the market, there is vulnerability to negative news.

Let's also take a look at the sectors that have the highest short interest (data courtesy of FINVIZ):

As is usual, I've created a chartbook for you.  You can find it HERE.

CHGS, SHZ : Two stocks with huge moves

I mentioned CHGS in this post. In that post, I mentioned that I had sold 1/2 of the position in the ramp and that I would re-buy if it pulled back in.  Time passed, and it didn't pull back down below from where I had sold it.  Accordingly, I bought back into it...in a greater size than what I had sold.  Yesterday's surge was unbelievably wild.  It is also an example as to how stop losses on the speculative plays can shake you out before the move gets going.

Here's the chart (Click!):

First, note the dip before the enormous break.  If your stop was too tight (10%), then you may have easily been shaken out before the rocket boosters engaged.  Speculative plays require speculative positioning (capital allocated).  I did not have a stop on this as I had my capital allocated accordingly, and I believed that with the technicals and the fundamentals, I had a low risk entry.

Second, I was lucky to be at my desk yesterday rather than at a client.  When the rocket boosters deployed, I systematically went into action--selling methodically into the lift.  I marked in fuschia the prices that obtained. This audacious move with huge pockets of gaps was on 46.5x relative volume. 

I currently continue to hold 15% of my position, and I may add to it. I'm interested in seeing the price action after absorption of the previous move.  For every buyer, there is a seller, and I have more to say about that a little later. This stock may very well go to the moon, and there was definitely a moon shot yesterday--but one has to ask about the sustainability of such moves.

There was other robust activity in Chinese mining concerns, SHZ being another case in point. Let's take a look.  Here's a 30 minute chart of SHZ (Click!).  I do not own it, but I did look and pass on it!

This stock rocketed up on 150x relative volume.  Wowsa!  What is interesting on this stock is that the move was not materially sold down as with CHGS.  I wanted to briefly share my view of "why" with you.  Let's take a look at two weekly profiles with the volume@price bars. No, you will not need coffee to stay awake. (Click!)

Zooming out to a weekly chart, we see two very different profiles.  For CHGS, there were lots of eager buyers from 09/09 through 03/10 that may have taken their eye off the ball and did not get out. Yesterday's ramp was some salve on a money wound, and they became very motivated sellers.

SHZ was quite another profile altogether.  The longest volume bar was cleared and there were no previous buyers at higher levels who would be motivated sellers.

I'm a firm believer of the importance of volume@price bars to understand the complexion of a chart and the stability of pricing a particular points.  I don't use pivots on stocks, but rather I look almost exclusively at this profile which helps me spot strength/vulnerability in different time frames.

Our job as traders/investors is to find high probability trades, allocate appropriate capital, and manage the risk in these trades.  I believe that V@P bars help inform that risk.  To take this one step further, looking at the long V@P bar on SHZ's chart, where do you think that there will be some very motivated sellers?  If the price falls back below the $4.00, there will be some nervous holders.

Position:  Long fractional position of CHGS

Sector Report

With this post, I'm re-committing to weekly sector reporting.  However, this report is spanning from July 30, 2010, since I have to use a data starting point, and I'm too lazy to pull the data and enter them individually. I'll resume to weekly changes in the next submission next week.  You can download the full PDF here.

Hard to believe that behind Basic Materials/Resources, that Utilities would be such an outstanding performer!  I chalk that up to dividend yield in the face of declining interest rates.

Here's a chart of the DJ Total Stock Market Index (Weekly Format) with the Volume profile.  I placed a yellow highlight over the next longest bar.

Chart Notes

I wrote about BTM here. I elected to take a position because I like the chart set up.

One holding that I have that I lightened up on is CHGS.  Here's a weekly chart (click to make larger):

I sold 1/2 of my position into yesterday's surge of 25% with 18+ relative volume.  Who's buying? Who's selling?  What news? (I couldn't find any!) I plan to rebuy that 1/2 when (IF!!) it pulls back in. If does not pull back in, I still have a nice entry point, and I will enjoy the ride.

As you can see by the volume at price bars on the left of the chart, there are a few folks that may want to unload as (IF!!) this thing rockets ups further.  However, if it can clear $1.80 per share, there's a nice gap in the volume@price bars that my create an airlift vacuum.

Or, the damned thing could sputter to the ground.  It is not unusual to see "spikey" activity before a meteoric crash and burn.  There are some nice fundamentals here that give me some confidence that is not to happen. 

TRIT is another holding that I wrote about it.  It also enjoyed a good day.  I did not sell my position into this ramp.  Here's a weekly chart (click to make larger):

Volume@price bars on this chart point to some resistance ahead.

My preference is to look at homogenous groups (sector, country).  Because I have been a lazy toad in not providing the weekly sector information (which I will resume next week), I did create for you a China chart book.  The charts are in monochrome so that you can print them out and study them.  It's a tool for your due diligence.  I hope that you find it helpful.  It is a big file....So be patient on the download.  You can download it here.

Blog Stuff and a couple of charts

I cannot believe that I let the 4th anniversary of my blog pass without mentioning it!  It has been a lonely wasteland of a place here of late.   The good news is that I've recommitted to my exercise plan.  You can read about that here.

While I abdicated doing my sector charts because Finviz had them, I'm going to go BACK to providing my sector reports.  The PROCESS of putting that together, helped me feel more centered on the market. I'll resume that not this weekend, but next weekend.  I was feeling like my work was redundant (which it is) against FINVIZ. 

Seems like the market is dominated by currency wars (fisticuffs?)  I'm not sure how any of it gets sorted out, but if we'd best keep half an eye on interest rates and half and eye on the USD levels.

I was wandering about in the foreign telecom sector.  I wanted to share a couple of charts with you.

Here BTM.  It has an interesting Volume by Price profile.  It has been a laggard in the foreign telecom area, but this set up looks promising.

I have no position in this, but I like this set up quite a bit.  Notice that if price can clear the top of the volume bar, there are few sellers lurking above.  Lots of accumulation over this period and at this price level.  As you know, there are no sure things (except that there are NO sure things).  But it's an idea for you.

While many are talking about gold being parabolic, take a look at this parabolic chart that you didn't hear anything about!

I don't own this, nor am I suggesting it as a buy, but it was a nice parabola! As you might surmise, as with most of these telecoms, the dividend made it very attractive.

TNE is another interesting chart:

I'm not thrilled about the fundamentals, but there is some volume coming in, and it might be worth putting on a watch list to see if it can make some more progress.

I don't own any of these, and BTM is the chart pattern that I particularly like.  Not much exposition here, so I'm sorry for my laziness.  I just wanted to throw a couple of charts out.

Here's a photo opportunity that my son alerted me to today--a garter snake on a shredded Busch beer can.