Ian Woodward's Investing Blog

Stock Market Rotation, Correction or Fertilizer?!

It may be a coincidence but every Tom, Dick and Harry is looking to short the Chemical – Specialty Fertilizer Stocks such as POT, MOS, CF and TRA, while others are wondering if the correction is over and it might be a good time to do a bottom fish on these stocks.  Some see Head and Shoulders formations for shorting and others see support at their moving averages. Beauty is in the eye of the beholder.  What ever they see, there has been a fair amount of damage done in the Market Indexes, the leading Industry Groups (Wolf Packs) and the Leading Stocks this week, as this note will quickly demonstrate.

corn

  • This time last week I warned not to count our chickens before they are hatched, but we were certainly looking very comfortable relative to the two key Targets I set for Long Term Buy and Hold Type 4 investors, while Types 1, 2, and 3 were making hay while the sun shines.  Types 2 and 3 have closed out most of their long positions, while Type 1 and some 2’s have turned on a dime and are short – many playing Ultra ETF’s where they double their money with the likes of the QID and FXP. 

  • It is amazing how times have changed, but as I have said before, you need to be a Jack of all trades and at least a master of two to make big money these days by playing the long and the short side.  Otherwise, be patient, prudent and pounce if and when the market corrects and we are off on a new Bear Market Rally again.

  • Another underlying theme for this note is that HGS Investors can see the beauty ebb and flow with changes in the market, the industry groups, the scenarios and the stocks and are not caught in the mire but can be ahead of the game.  I will take you through the layers with Tops-Down Investing with a few simple pictures showing you the Change in the Market in just one week flat!

Let’s start with the Market Indexes and demonstrate how they have gone from being most promising and Mostly Green to Blinking Red this week:

markets 

  • A picture is worth a thousand words and High Growth Stock Investor gives us the tools to create the picture.  It is the CHANGE in the panorama of snapshots that matters not the still photographs.  That is the difference between Information and Data. 
  •  Inside a week, we see how the deterioration has set in as we see the market Indexes go from a reasonable Mostly Green on May 20th to a Murky Red by May 23rd on the Bongo Daily, Bongo Weekly and the Accumulation/Distribution Signals.
  • That picture tells one to garner profits, take cover, and suggests switching from Bullish to Bearish.

Now let’s look at the two Critical Targets that will eventually turn us from a Bear Market Rally to a Full Blown Market Rally as I have covered copiously in the High Growth Stock Newsletter as well as on this blog.  The picture below shows that while both targets were in our grasp last weekend, they are now looking “Proper Poorly” to quote an Uncle of mine from the past: 

  1. Short-Term Target: The glass ceiling of getting past the 200-dma is uppermost on our minds.
  2. Long-Term Target: The 40-period Bollinger Band Chart must see the Indexes above the orange line of the middle BB.  That is the true test of whether all Indexes are fully on the mend.

targets

 

Next, I have selected nine Wolf Packs which we have followed for the past several months and one which has just poked its head up in the last few weeks – Energy – Nuclear/Uranium.  Thanks to Lou Powers for segmenting the vast Energy Group and to the HGSI Software Developers for incorporating this in the recent improvements to the IM Industries Groups.

industries 

  • It doesn’t take two minutes to see that the leading Industry Groups all got hit this week

  • Energy Coal and Explor&Prod are still strong but the former took a slight hit this week

  • Chemical Fertilizer has been tired for some time and Steel Producers are losing ground

  • Energy Solars took a hit this week but came back yesterday from the pullback

  • Machine General, Shipping, Semi’s and Internet Net Svcs are all struggling

  • The new glamour kid on the block is Energy –Nuclear/Uranium for obvious reasons

  • Don’t get too excited unless you like tiddlers of <$6.00; the only big stock to watch is CCJ 

Finally,  let us burrow down on the Chem – Fertilizer Group which is looking weak:

fertz

Enjoy the long weekend and I have given you plenty to chew on, so keep your powder dry and good luck next week.  Understand that it is the CHANGE in the numbers that matter to see the panoramic pictures I have put together for you to turn data into information.  I trust that gives you the pulse of the Market, the Targets I set for us, and the Industry Groups we follow at this critical time.

Best Regards, Ian.          

 HGS Logo
Try a 60-day free trial subscription – no credit card required for sign-up.

 

7 Responses to “Stock Market Rotation, Correction or Fertilizer?!”

  1. Maynard Says:

    Ian,

    One of my fondest memories is when I took my small granddaughter to a children’s party where the entertainment was a magician. After each trick she would look at me with her big eyes and say “how did he do that”? My answer was always the same, “it was magic”.

    This time you are the magician but now I know the answer, it took a lot of work to prepare this presentation, right? Sure HGS Investor calculates the raw data but your creativity made it possible to create this panorama.

    Thank you. This information truly speaks a thousand words.

    Maynard

  2. ian Says:

    Maynard, my friend:

    You made my weekend. Yes, it took a bit of work to prepare those snapshots, but the idea came to me that I should dust off the work I showed from the March Seminar where I presented my earlier work of 2002 relating to ERG and Industry Group Speed.

    Of course your beady eyes spotted that it is the CHANGE in the data that gets us to Information. Hopefully in time the reporting and feeding up of the meal in HGSI will take us to this higher level…though excellent as it is right now. I am tickled pink that you see the value of the charts.

    Best Regards, Ian.

  3. David Galardi Says:

    Ian,

    I second Maynard, for an ol’dog, you have many more tricks than this youngster. I know the amount of work it takes to do such an analysis and offer many thanks on behalf of my gang!

    Enjoy the long weekend and let’s remember the sacrifice of others to allow us to have this conversation!

    David

  4. Jay Robinson Says:

    Thanks for the time you take to put things like this together Ian, it’s very nice and concise.

    We need to get Energy Solutions (ES) into the Energy-Nuclear/Uranium group and out of where it currently is. It is the only current pureplay on the sector.

  5. ian Says:

    Thanks Jay for the heads-up. I will remind george to get this in to the next update.

    Best regards, Ian.

  6. Mark Gomes Says:

    Ian,

    Question: Has anyone studied the performance of the individual companies that trigger the Hindenburg Omen (specicfically, the ones that made new highs versus the ones that made new lows)? I’m curious as to which group outperforms when the market drops, as well as during the eventual recovery.

    Keep up the great work…thanks!

    Mark

  7. ian Says:

    Hi Mark: Thanks for your feedback and encouragement. No, I am afraid I haven’t studied that question, but for sure I will the next time around. Just intuitively, I would say that the stocks making new highs at the time back a year ago when the Hindenburg’s triggered would be in the Wolf Packs that were most in favor back then, led by Transportation Shipping, then of course all the Energy Stocks, the Steels, the Solars, to name a few. Coal was not hot at that time as it is now, but I will keep an eye out for that project next time around.

    Thanks for mentioning it. Best Regards, Ian.

Copyright © 2007-2010 Ian Woodward
Disclaimer: Commentaries on this Blog are not to be construed as recommendations to buy or sell the market and/or specific securites. The consumer of the information is responsible for their own investment decisions.