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stock newsletter, stock picking

July Stock Letter

July 2, 2016

FANG support ends; what is left keeping the market from plunging?

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Overview

"FANG" stands for Facebook, Amazon, NetFlix, and Google. Note the weakness in these stocks, especially NetFlix and Google. The S&P 500 and the Dow have been dropping for two weeks while the Nasdaq Composite) has dropped for three weeks and has broken its bullish tend line that began in April. Historically, the technology laden Nasdaq leads the stock market. Previously, I've laid out how hollow many of the most bullish stocks are. Now, we can start to see the weakness by simply looking at the main stock averages. The price has been moving away from the top line of the wedge in the S&P and Dow and from the top of the bullish trend channel in the Nasdaq Composite. Notice how the down bars since early June have been bigger than the up bars.

My table of stock-market sectors shows a divide between the Technology Group and the Cyclicals Group for the second-straight month. The Technology Group lost 1.9% while the Cyclicals Group gained 0.9%. Stocks in both of these groups are considered growth stocks. A broad-based rally is not possible with a big part of the growth stocks sputtering.

Stock Market Sectors

Sector Group Sector Contents Sector June July Aug Sept Oct Nov Dec Jan Feb March April May Sector Average
Overall graph of strength (cyclicals) versus weakness (staples)
Cyclical Automobiles -2.1% 4.9% -3.0% 1.6% -4.1% -0.3% 7.1% 6.7% -3.9% 6.7% 1.0% 0.9% -0.50%
Cyclical Aerospace 0.3% 2.6% -1.3% -1.3% 0.0% 6.8% 6.8% -4.8% -0.4% 1.9% -1.0% 3.0%
Cyclical Machines 2.9% 4.0% 0.8% 0.8% 8.2% 7.3% -4.1% -0.1% -1.2% 0.0% 3.6% 0.7%
Cyclical Building -0.4% 3.0% -0.3% -5.1% -3.0% -2.1% 0.7% 3.6% 4.5% 4.0% -1.1% 0.0%
Cyclical Leisure 2.0% 0.4% -0.4% 0.9% 6.6% -3.1% -1.6% 4.1% -3.3% 6.6% 5.9% 2.2%
Cyclical Basic Materials 12.0% 7.3% -11.4% -5.1% 4.6% 19.2% -2.3% 2.7% -2.7% -6.3% -5.9% -6.5%
Cyclical Energy 3.1% -4.5% 2.4% 2.7% -2.4% 0.4% -0.9% -3.9% -5.2% -3.2% -3.5% -1.2%
Cyclical Media -2.9% -2.0% -1.5% 0.0% 3.7% 2.4% 1.0% 1.4% -2.7% 3.0% -4.6% -6.5%
Cyclical Real Estate 1.3% 0.9% -3.9% -5.1% 4.3% -3.3% 1.4% -2.1% -0.3% 1.8% -0.9% -2.1%
Cyclical Retailing 0.6% 0.9% -4.2% -3.6% -0.7% 2.9% -3.9% -1.7% -0.8% 0.0% 3.9% 1.1%
Cyclical Transportation -2.1% -0.4% 2.0% 3.8% 2.3% 10.1% -2.6% 1.6% -0.5% -3.2% 0.9% 2.9%
Finance Banks -7.0% 5.1% 6.9% 0.5% 8.2% 12.5% 0.0% 1.9% 2.6% -6.4% -1.7% -6.4% -2.43%
Finance Diversified Financials -9.2% 6.1% 3.9% 0.4% 2.5% 7.0% 0.6% 0.4% -0.9% -3.0% -1.0% -3.1%
Finance Insurance -3.9% -1.0% 3.9% 3.3% 2.8% 3.9% -0.5% -0.2% 0.1% -0.9% 1.0% 2.2%
Staple Cmmcl Svcs & Supplies -2.1% -0.1% -1.7% -1.6% -0.9% 0.5% -1.1% 2.2% 2.8% -1.8% -2.0% -1.8% 0.62%
Staple Consumer 2.2% -1.5% 0.5% 0.5% -2.9% -6.6% -1.6% 2.0% 1.3% 2.6% -2.2% 1.1%
Staple Apparel 0.9% -2.5% -1.7% -4.7% -3.8% 3.0% -8.7% -12.1% -5.1% 4.9% -1.3% 0.8%
Staple Food & Beverage 3.9% -2.5% -1.7% -2.0% 3.3% -8.4% 2.5% -2.7% -1.8% 1.5% -1.8% 0.1%
Staple Alcohol & Tobacco 4.3% -6.9% 0.8% -0.3% 0.0% -11.5% 0.7% 1.0% 2.3% 1.8% 3.4% 5.0%
Staple Health Care 0.5% 1.2% -5.7% -0.8% -4.6% -0.2% -1.0% -0.7% 1.7% -1.4% 0.1% -1.4%
Staple Agriculture -4.6% -1.2% 5.6% -3.1% 5.9% -5.7% -0.4% 0.7% -1.5% -1.0% -4.5% -0.2%
Staple Chemical -1.9% -1.2% 4.8% -1.0% 2.3% 2.7% -3.0% 2.6% -2.1% -0.2% -0.9% -0.5%
Staple Utilities 6.4% -6.6% -5.5% 3.1% 3.2% -7.7% 2.1% -2.3% 0.0% 1.8% -2.0% 2.5%
Technology Pharma & Biotechnology 0.8% 0.0% 4.5% -3.8% -0.3% -4.8% 0.6% 4.2% 2.9% -1.7% -2.0% -5.5% 2.79%
Technology Semiconductors -2.2% 8.7% 5.4% 4.6% 0.0% -0.8% 2.1% 5.8% -5.2% 6.1% -0.6% 9.7%
Technology Software & Services 1.6% -4.2% 4.0% 3.5% 0.0% -11.3% 1.0% 7.0% -6.4% 5.3% 4.0% 10.2%
Technology Technology Hardware -2.4% 7.4% 4.4% 5.9% -2.7% 0.2% -0.7% 6.2% 4.0% 1.2% 1.4% -0.2%
Technology Electronics -5.5% 1.5% 2.2% 2.3% 0.9% 1.7% 0.1% 6.0% -1.7% 1.8% 2.4% 2.4%
Technology Internet -4.5% 4.6% 1.7% 1.9% 1.4% -8.9% 3.7% 1.9% -1.7% 0.8% 5.8% 2.3%
Technology Telecommunication Services 7.5% -3.1% -4.4% -1.3% -6.8% 1.6% 0.5% -2.5% -5.4% 0.2% -3.0% 0.6%

Futures that affect Stocks

These futures parallel or move opposite to the market. Crude oil and gasoline mostly move opposite to the market. The note and the bond tend to move with the market but the bond and note generally change trends six to eighteen months earlier then the stock market. The dollar also tends to move with the market because a rising dollar, tends to mirror an expanding economy.

Both crude oil and gasoline have followed similar patterns since early April but crude is weaker; it has dropped further and its recent gains are lower than those for gasoline. Both gasoline and crude are way below their recent historic highs.

Both the 30-year bond and the 10-year note have been rising since March but the TY has recently broken its bullish trend line but the US has not.

The dollar has been dropping since January. It has been in a bearish trend channel since early April. It may have found temporary support at the bottom of the bearish trend channel. But, the key is if it rises enough to break the bearish trend line.

Last Issue's Stock Selections:

(See our Trading Tutorial and Historical Trading Results)

My trade in June was an awful -13.7%. This was worse than the S&P 500's tiny gain of 0.3%.

Shorts

AVP -13.7%

FITB - not traded

CLF - not traded

Current Stock Selections:

Longs:

No long picks this month.

Shorts:

Century Link Inc. (CTL)

CITL is rated 20 out of 99 by Investors.com and is in the telecom services - integrated group ranked 120 of 197 groups. Its most recent last three quarters earnings was -26%, and its most recent quarter was -27%. Its 3-year sales growth rate is -1% and it was -4% for the most recent quarter. It has dropped hard since the middle of June. The drop has erased all of June and most of May's gains. Look for entry.

Dean Foods Company (DF)

DF is rated 6 of 99 by Investors.com and is in the food - dairy products group ranked 195 out of 197 groups. Its earnings for the last 3 quarters was -14% but the most-recent quarter was -71%. The 3-year sales growth was -8%. The price has been dropping all through 2017. Look for entry.

J C Penny Co Inc. (JCP)

JCP is rated 12 of 99 by Investors.com and is in the retail - department stores group ranked 189 out of 197 groups. Its three-year sales growth was 1% and it's most recent quarter was -4%. Wait for the price to drop below the June 22 low.

Historical Performance

Here are our performance results since we started this newsletter in May 2003:

Average monthly return: 5.66%

Average 12 month return: 68%

Cumulative return: 866%

On a monthly basis, I have beaten the S&P 500 130 out of the last 153 times.

Trading Methodology:

For more information about our trading techniques, read our free trading tutorial.

Rates (recurring):

1 Month $35

3 Months $90

6 Months $150

12 Months $250


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These comments are given to serve as guidelines only. Traders and investors are advised to thoroughly research trades prior to investing. No guarantees are made for accuracy. Trading involves risks as well as gains and the reader is solely responsible for any actions taken in the markets. Neither the author or publisher assumes any responsibility whatsoever for the reader's decisions.



This stock picking stock newsletter has had superb gains since its beginning in 2003. Stock picking in the stock newsletter is based on technical market analysis. This stock newsletter has an average monthly return of 6.1%. The stock picking in this stock newsletter has an average 12-month return of 73%. Our cumulative return since 2003 for our stock picking in this stock newsletter is 480%. Our stock picking stock newsletter has had superb gains since its beginning in 2003. Stock picking in our stock newsletter is based on technical market analysis. Our stock newsletter has an average monthly return of 6.1%. The stock picking in our stock newsletter has an average 12-month return of 73%. Our cumulative return since 2003 for our stock picking in our stock newsletter is 480%. The stock picking in our stock newsletter has had superb gains since its beginning in 2003. The stock picking in the stock newsletter is based on technical market analysis. Our stock newsletter has an average monthly return of 6.1%. Stock picking in this stock newsletter has an average 12-month return of 73%. Our cumulative return since 2003 for the stock picking in this stock newsletter is 480%.