StockTwits 50, May 28
- Posted by Ivanhoff
- on May 26th, 2012
It was a week of notable divergences. Basic materials rallied alongside the U.S. dollar. The long awaited mean-reversion rally occurred, but at this point of time it should not be considered as anything more than a technical bounce from oversold levels. Curiously, the best performing sectors were the ones with the highest relative strength (consumer discretionary and biotech) and the lowest relative strength (basic materials and semiconductors).
The Euro ($FXE) broke down to an 18 month low. The price action in the Euro used to be the ultimate benchmark of “risk on” and “risk off” sentiment in the global market, the perfect alternative indicator of fear and greed. These days, it is gradually starting to become a simple reflection of the market’s expectations for a weaker European economy ahead, as it should be.
Money never sleeps. It constantly moves from one asset class to another for the simple reason that one company’s rising expenses are another company’s rising revenues. The recent weakness in crude oil has been considered a form of a tax break for consumers, hence the relative strength of the sector. Other groups that have benefited include casual restaurant chains ($EAT, $DRI) and airlines.
For the week, the St50 index appreciated 4.9%. The S & P 500 and the Nasdaq Composite gained 1.74% and 2.11% respectively. Momentum stocks outperformed significantly, but the breadth at the 52-week high list is still too thin to read too much into that move.
The best performing St50 stock was Ariba, Inc ($ARBA), which received a $45 cash offer from the German software giant $SAP. Judging by the price action, the market seems to expect an even higher offer as potentially Oracle might enter into a bidding war.
During corrections, future market leaders form bases. Historically, it has been worthwhile to pay special attention to the first stocks breaking out to all-time highs as the market attempts to recover. Application software maker Solar Wind ($SWI) and online travel agency ($EXPE) cleared that level during the week. Also, one of the only two publicly traded 3D-printing stocks, $DDD is near that point.
Social media stocks Linkedin ($LNKD) and Zillow ( $Z) started the week under heavy pressure as the giant in the field, Facebook ($FB), fell below its IPO price. Both $Z and $LNKD managed to quickly recover. Zillow is near all-time highs. LinkedIn still looks technically vulnerable.
The purpose of the St50 list is to save time and help to improve your odds by focusing on stocks that are strong technically and fundamentally. How you approach the list will depend on your market horizon. Long-term investing is essentially a bet on how other people’s perceptions will change over time. It is about answering the question What are the catalysts that will change the market’s expectations? Trading is about capturing real time changes in sentiment and benefiting from the sweet spot of a major repricing process. You have to define yourself – are you an investor or a trader? – because the path you choose to take will impact everything you do.
You can easily follow any or all of the stocks in the ST50 on StockTwits by clicking here.
Have A Great Weekend!
~ Ivan Hoff (@ivanhoff)
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