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stock newsletter, stock picking

September Stock Letter

September 3, 2016

Extremely low current interest rates tell us that business activity is very weak

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Overview

Both the stock market and the U.S. bond market have been gaining in price since the end of the so-called great recession (i.e., so-called because the recovery has been so bad that it should be called a depression). In bonds, interest rates move opposite the price. So, we have very low interest rates now. This is because there is very low demand for loans. It's simple supply and demand. If there was a higher level of business activity, and if consumers weren't tapped out, a higher demand for loans would inexorably raise the price (the interest rate) of the loans. The lack of business activity and the low interest rates makes it very difficult for savers to accumulate any money. The amount that can be earned in relatively safe interest vehicles is less than the rate of inflation for rent, food and gasoline.

The S&P 500 rose over the last four days, but Fridays gain disintigrated to end with no gain at all. It shrank in the presence of resistance from the bars between July 27 and August 8 - all at very close price levels. The Nasdaq Composite also gained over the last four days. But, it had been below the bullish trend line that began in January, and just crawled back above on Thursday. The DOW followed a similar example of a chart that is, obviously, going nowhere quite slowly.

My table of stock-market sectors continues to show a divide between the Technology Group and the Cyclicals Group. The Technology Group gained 1.23% while the Cyclicals Group gained only 0.3%. The biggest movers in the Cyclicals group was a big gain in the Automobile and Basic Materials (e.g., gold mining) sectors with big losses in the Media and Energy sectors. Despite the biggest relative-strength gain by the Automobile sector, its fundamentals reflect a bottom-dweller rather than a leader:
Symbol 3-Year Earnings Growth 3-Year Sales Growth
LDL247
CYD-19-10
OSK-1-2
HMC-74
GNTX1211
DAN24-4
TTM-270
DLPH133
GT247
F103

Stock Market Sectors

Sector Group Sector Contents Sector Sept Oct Nov Dec Jan Feb March April May June July Aug Sector Average
Overall graph of strength (cyclicals) versus weakness (staples)
Cyclical Automobiles -3.0% -4.1% -0.3% 7.1% 6.7% -3.9% 6.7% 1.0% 0.9% -3.8% 0.1% 5.8% 0.30%
Cyclical Aerospace 0.0% 6.8% 6.8% -4.8% -0.4% 1.9% -1.0% 3.0% 2.3% 2.6% 5.2% 2.4%
Cyclical Machines 0.8% 8.2% 7.3% -4.1% -0.1% -1.2% 0.0% 3.6% 0.7% 1.6% -0.6% 1.4%
Cyclical Building -5.1% -3.0% -2.1% 0.7% 3.6% 4.5% 4.0% -1.1% 0.0% 6.3% 0.4% -1.2%
Cyclical Leisure 0.9% 6.6% -3.1% -1.6% 4.1% -3.3% 6.6% 5.9% 2.2% -2.9% 4.6% -0.8%
Cyclical Basic Materials -5.1% 4.6% 19.2% -2.3% 2.7% -2.7% -6.3% -5.9% -6.5% 0.6% 1.8% 4.7%
Cyclical Energy 2.7% -2.4% 0.4% -0.9% -3.9% -5.2% -3.2% -3.5% -1.2% -0.9% -1.6% -5.2%
Cyclical Media 0.0% 3.7% 2.4% 1.0% 1.4% -2.7% 3.0% -4.6% -6.5% -1.0% -2.3% -5.7%
Cyclical Real Estate -5.1% 4.3% -3.3% 1.4% -2.1% -0.3% 1.8% -0.9% -2.1% 1.6% -1.9% 0.5%
Cyclical Retailing -3.6% -0.7% 2.9% -3.9% -1.7% -0.8% 0.0% 3.9% 1.1% -5.8% -1.1% -0.1%
Cyclical Transportation 3.8% 2.3% 10.1% -2.6% 1.6% -0.5% -3.2% 0.9% 2.9% 11.9% -7.1% 2.4%
Finance Banks 0.5% 8.2% 12.5% 0.0% 1.9% 2.6% -6.4% -1.7% -6.4% 8.2% -1.0% -2.2% -2.67%
Finance Diversified Financials 0.4% 2.5% 7.0% 0.6% 0.4% -0.9% -3.0% -1.0% -3.1% 6.2% 0.1% -2.0%
Finance Insurance 3.3% 2.8% 3.9% -0.5% -0.2% 0.1% -0.9% 1.0% 2.2% 3.9% 1.9% -3.8%
Staple Cmmcl Svcs & Supplies -1.6% -0.9% 0.5% -1.1% 2.2% 2.8% -1.8% -2.0% -1.8% 0.1% -0.7% -1.0% -0.58%
Staple Consumer 0.5% -2.9% -6.6% -1.6% 2.0% 1.3% 2.6% -2.2% 1.1% -1.3% -1.8% -0.1%
Staple Apparel -4.7% -3.8% 3.0% -8.7% -12.1% -5.1% 4.9% -1.3% 0.8% 4.1% -2.5% 0.3%
Staple Food & Beverage -2.0% 3.3% -8.4% 2.5% -2.7% -1.8% 1.5% -1.8% 0.1% -4.1% -1.4% -3.0%
Staple Alcohol & Tobacco -0.3% 0.0% -11.5% 0.7% 1.0% 2.3% 1.8% 3.4% 5.0% -5.8% -2.2% 0.5%
Staple Health Care -0.8% -4.6% -0.2% -1.0% -0.7% 1.7% -1.4% 0.1% -1.4% 4.8% -2.7% 0.6%
Staple Agriculture -3.1% 5.9% -5.7% -0.4% 0.7% -1.5% -1.0% -4.5% -0.2% -0.4% 0.7% -4.0%
Staple Chemical -1.0% 2.3% 2.7% -3.0% 2.6% -2.1% -0.2% -0.9% -0.5% 1.6% -0.4% 0.1%
Staple Utilities 3.1% 3.2% -7.7% 2.1% -2.3% 0.0% 1.8% -2.0% 2.5% -4.9% 2.4% 1.4%
Technology Pharma & Biotechnology -3.8% -0.3% -4.8% 0.6% 4.2% 2.9% -1.7% -2.0% -5.5% 6.4% -1.0% 2.4% 1.23%
Technology Semiconductors 4.6% 0.0% -0.8% 2.1% 5.8% -5.2% 6.1% -0.6% 9.7% -2.7% 8.3% 3.0%
Technology Software & Services 3.5% 0.0% -11.3% 1.0% 7.0% -6.4% 5.3% 4.0% 10.2% 0.4% 2.0% 4.4%
Technology Technology Hardware 5.9% -2.7% 0.2% -0.7% 6.2% 4.0% 1.2% 1.4% -0.2% -4.9% 1.6% 2.0%
Technology Electronics 2.3% 0.9% 1.7% 0.1% 6.0% -1.7% 1.8% 2.4% 2.4% 0.6% -0.5% -0.7%
Technology Internet 1.9% 1.4% -8.9% 3.7% 1.9% -1.7% 0.8% 5.8% 2.3% -3.7% 5.3% 1.0%
Technology Telecommunication Services -1.3% -6.8% 1.6% 0.5% -2.5% -5.4% 0.2% -3.0% 0.6% -6.5% 0.4% -3.5%

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.

Crude oil fell during August. Gasoline, on the other hand, gained, moving from 1.35 on August 17 to 1.73 on August 31.

Both the 30-year bond and the 10-year note have gained in price since early July. Neither the bond or note is likely to break above the strong resistance stemming from the June highs. So, interest rates are probably as low as they are going to be.

The U.S. dollar has been dropping since January. It shows evidence in the chart that it may be bottoming. It broke the short-term bearish trend line, that began in June, in the middle of August. It will have to move up to about 93 to break the longer-term bearish trend line that began in early April; it is about 92.8 now.

Last Issue's Stock Selections:

(See our Trading Tutorial and Historical Trading Results)

My 0.23% loss in August was well below my long-term monthly average and below the S&P 500 being flat.

Shorts

GT -2.3%

NSC -.9%

WFC 2.5%

Current Stock Selections:

Longs:

No long picks this month.

Shorts:

Bunge LTD(BG)

BG is rated 24 out of 99 by Investors.com and is in the agriculture operations group ranked 145 of 197 groups. Its last three quarters of earnings was -8% and its three-year sales growth was -11%. The price shot higher September 1. Look for entry if the price doesn't continue up.

Philip Morris Intl (PM)

PM is rated 26 of 99 by Investors.com and is in the tobacco group ranked 181 out of 197 groups. Its earnings for the last 3 years was -6% and the 3-year sales growth was -3%. Wait for a sign of weakness and for the bullish trend line to be broken.

Historical Performance

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

Average monthly return: 5.7%

Average monthly return over the most recent 12 months: 12%

Average 12 month return: 68%

Cumulative return: 881%

On a monthly basis, I have beaten the S&P 500 132 out of the last 156 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%.