StockTwits 50, February 27
- Posted by Ivanhoff
- on February 24th, 2012
It seems that the reflation trade is alive and back in full force.
Crude oil ($CL_F) advanced another 6% for the week and it is already hovering around $110. Historically, January and February tend to be the weakest performance months for oil, so this might be just the icing on the cake. Oil & Gas Drilling and Equipment stocks are the biggest beneficiaries of the situation and many of the small caps in the groups have had 20%+ weekly moves recently.
On the opposite side of the performance spectrum, the Transportation index ($IYT) continues to weaken and it closed the week below its 50dma. Railroads recovered some of their losses for February, but airlines stocks dived like stones, recording double digit percentage losses for the week across the board.
The U.S. Dollar index ($UUP) continues to struggle below its 50dma, giving a boost to basic materials. Gold, Silver and Agricultural chemicals broke out of major consolidations during the week. Gold is looking beautiful on all important time frames, but recent history reminds us that just when it looks the most enticing, it invariably fails. This time might be different, but blind chasing is never a wise proposition.
Meanwhile, an important new old trend is subtly taking shape this earnings season: companies from various industries are warning of rising input costs which squeezes their margins. Some of the most recent examples include: $DECK (shoes), $MNST (energy drinks), and $WMT (retail). Wal-Mart is typically a company with strong purchasing power, meaning that it usually has the leading role in price negotiations with suppliers. You can squeeze suppliers only to a point. Without the ability to transfer higher input costs to customers, margins and profits are bound to suffer.
But in the land of the very best growing stocks, the St50 Momentum Index gained 1.34% outperforming $SPY and $QQQ, which advanced 0.65% and 0.52% respectively for the week. The top 10 ranked st50 stocks did even better, rising 2.42% on average. The Small cap index ($IWM) declined 0.24% for the week, reflecting the recent flight to quality in the face of larger cap stocks with strong earnings and promising growth prospects.
The worst St50 performer for the week was $TRAK, which declined 7.8% after guiding next quarter’s earnings below consensus estimates. $KLAC was the other rotten apple in the St50 basket. The semiconductor slipped below its 50dma and it is looking lower from here. Both stocks are out of the list.
The top St50 gainers for the week hail from different industries: $HLF and $JAZZ (drugs), $MNST (soft drinks), and $URI (renting and leasing services). We also saw several breakouts to new all-time highs: $HLF, $CBI, $WXS, $V, $ARG, $LQDT, and $AVD among others.
It continues to be a low-correlation market of stocks with opportunities on both the long and the short side. Some of the more enticing setups for next week include: $WFM, $JAZZ, $FARO (reports earnings), $MANH, $ISRG, $ALGN, $ULTI, $UA, $TW, $TIBX, $TSCO, $COR, $DLR, $PNRA, and $SYNA. Yes, the list looks rich, which either means we are in the sweet spot of this bull market or that a correction might be just around the corner. I will take setups as they show up and let the market take me out if I am wrong.
You can easily follow any or all of the stocks in the ST50 on StockTwits by clicking here.
Have A Great Weekend!
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.blog comments powered by Disqus