Ian Woodward's Investing Blog

Schizophrenic Market, Strange Day, Rotation?

  1. I had a few days R&R visiting my Son and his family in Oregon, and with the cobwebs cleared I am back to give you the pulse of the market as I see it.  In reading my backlog of e-mail, I saw headings such as the above, and many are shaking their heads when the market was up and their portfolios are down!  One thing is for sure…we cannot be asleep at the switch and as you will soon see I have figured out what the cross-currents are using the Group Performance Analysis Tool in the HGSI Software.   
  2. The beauty of the software is that we can smoke out where the money is flowing in and out NOW, but more importantly to have a set of User Groups of past leading Wolf Packs and emerging Wolf Packs.  This is particularly powerful at Earnings Report Time or as I say “We must keep a Beady Eye on Qeps Date, i.e. whether the Earnings are out or not.” 
  3. Let me give you a few pointers before I give the results of my work, which has taken a bit of delving, and I hope will be the basis for us deciding whether there is serious rotation in effect or not, or whether we have profit taking coupled with new Emerging Wolf Packs. 
  4. It is no news to you that in the last couple of days, two of the three favorite Wolf Packs that have given us good money have been hit hard the last two days, i.e. Chemical – Specialty and Energy Alternatives including Solar and Coal.  The Transportation – Shipping got hit hard earlier but they are dribbling back, so you need to watch those.  In passing you can add the Materials – Steels to the former, aka STLD and AKS as examples, which have also just announced stellar earnings but are also under recent pressure.   
  5. It goes without saying that if you were in Potash (POT), MOS, TNH, and CF you would surely have seen that most of these were hitting NEW HIGH JUMP records, particularly POT which got most people’s attention as it was decidedly moving into a climax run.  That is not to say that it won’t go higher after the correction is completed.  What people always forget is that great stocks like POT will move in anticipation of the earnings report for a final burst of Price Gain, and of course Greed and Fear play their part at such times. Enough said on that score.  But we should also balance that with the fact that the Earnings Report is stellar and with all the story lines on this Industry Group, there will be rotation of players and the stock will come roaring back given time.  Just look at the five favorite horsemen to see that they are starting on their way to recovery…AAPL, BIDU, GOOG, GRMN, and RIMM. Eventually the story gets stale and the buying dries up and they fade away, but for now keep an eye on whether these groups are just giving up profits or their turn in the sun is behind them. 
  6. The bottom line is that the Jury is out at this point in time whether we are just experiencing Profit Taking in these leading Industry Groups or whether this is the start of Rotation on these groups that have carried the market for ages and we as HGS Investors have enjoyed to our heart’s content.  Don’t be asleep at the switch and I have provided you with the stock lists to watch below, so there is no excuse for being caught with no swim suit on as the tide runs out. 
  7. In my last few blogs I have concentrated in giving you the yardsticks for establishing if this Bear Market Rally is coming to a top or it was just pausing to refresh before it moves again.  Of course, the Technical Analysts are drawing lines of resistance to suggest we are due for a correction, but the counterpoint is that the earnings reports so far in the Companies that matter most have been stellar and as such this market has shown a good deal of resilience to trotting down at this stage.  I note that Microsoft reported today with “soft” earnings performance (pardon the pun which I couldn’t resist), so tomorrow may be another story. 
  8. Now to the point of new Emerging Industry Groups; this would seem to be essential if this rally is to continue to get us into a “safe zone” which implies getting the Indexes up at least 15% from their lows.  I won’t belabor the point, but I have ferreted out two Groups right under our noses that are on the trot…or maybe I should say are starting to gallop.  Of course Technology is one and the other is of all things Fin – Equity Reits, many of which pay good dividends and are appearing out of the ashes.  Just look at the results for just four days trhis week compared to the S&P 500.
  9. I hope with all the snapshots I give you below that I do not have to do more than tell you that the stocks selected all had both Bongo Daily and Bongo Weekly signals “Yes” and that Earnings are already out for starters.  You figure how to go from there, but I think the evidence is pretty convincing as to why it seems we have a Schizophrenic Market, A Strange Day, and Rotation, all rolled into one!  As a winky-winky, you know you have to start with a Stake in the Ground and although I am giving you four different pictures to chew on, I STRONGLY suggest you put these same Stocks into User Groups and then start your Group Performance Analysis (GPA) on my Wife’s Birthday, i.e. March 17, 2008!  You will be amazed at the results. 
  10. On second thoughts, for the benefit of the doubting Thomas’s I will do just one snapshot at the end that shows how we have made good money in our Portfolios following Hot Wolf Packs, using March 17th as the Stake in the Ground, which is just five weeks ago…up  31.45%.

Chem tech reits march 17 

Just look at the whopping Gains in this Portfolio of Hot Wolf Packs in just five weeks, and that is after they have been drubbed for two days!  These stocks have been there on this blog for all to see going back over six months or more.  That is the Power of the HGS Investing Principles and of the Software.  Good Luck.


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.