StockTwits 50, September 17
- Posted by Ivanhoff
- on September 15th, 2012
Surprises tend to follow the direction of the established trend, more often than not. Judging by the price action in gold and silver miners alone, we could rightfully say that the stock market has been expecting and discounting some form of QE3 for a few weeks already. The truth is that even the market was surprised by the aggressiveness of Bernanke, and the price action in basic materials, emerging markets, and home builders was quite a tell.
For the week, the St50 index appreciated by 1.85%. Many momentum stocks look technically extended and are already showing signs of distribution due to profit taking as capital is looking for better setups. Natural sector rotation is under way. The rally was initiated by tech and consumer discretionary. Now, basic materials and energy are taking the lead.
Money is leaving bonds and equities are the only alternative. Many hedge funds are so far behind that they are willing to scoop everything they can get their hands on. This is why high relative strength stocks that have consolidated over the past month or so are finally breaking out all over the place. (some recent examples: $PNRA, $ASGN, $CTRX, $CF). When they are done with momo stocks (and I think they are, for now), they will go after the “dogs” and squeeze the shorts.
One of the notable moves over the past week was in homebuilders. $XHB went ballistic and appreciated 6%, reaching levels not seen since 2008. The stock market has been discounting a housing recovery for more than 8 months. The first signs showed up in February of this year, when some homebuilders’ stocks made fresh 52-week highs. Most of them have had 50%+ runs since then. In the StockTwits50 edition on July 16, I specifically highlighted the action in the sector:
I don’t know if the housing sector is finally recovering, but the stock market has been discounting that for awhile. Everywhere I look, there are signs of rising market expectations and prices don’t change, unless expectations change. Rents all over the U.S. are near all-time highs, so are REITs. Home builders ($LEN, $TOL), home improvement stores ($HD, $LL), credit check services ($EFX), real estate websites ($Z), mortgage and property insurance companies ($HCII), regional banks ($TCBI, $OZRK), property developers ($COR) are substantially outperforming the rest of the market and exhibiting notable relative strength.
$AAPL was in the spotlight again as it announced its new iPhone. Many, including me, expected a brief “sell the news” event, but it never happened, at least not yet. Boosted by the strength in the overall market, $AAPL again reached new all-time highs.
$UNFI gave cautious outlook during its earnings call and gapped down back to its 50dma, where it found quickly buyers. The other organic food plays on the list $WFM and $TFM basically had a non-event week.
Many of the St50 stocks are dangerously extended, so a consolidation in price or time here is natural. With that in mind, I expect many of the pullbacks to major moving averages to be welcomed as buying opportunities and snapped back quickly. Don’t chase. Be very selective with any new purchases and have a clear exit plan, because as the saying goes – if you don’t have an exit plan, you become part of someone else’s exit plan.
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