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stock newsletter, stock picking

August Stock Letter

July 30, 2016

Stock market limited by shrunken bullish trend channel

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Overview

The bullish trend line of the S&P 500, DOW and Nasdaq are all intact. The long-term trend, using monthly bars, started in 2009 (after the great recession) has not been broken. On the other hand, the top of the trend channel has been steadily shrinking as highs have not kept pace with lows. As time goes on, the separation between where the highs should be and where the top of these highs actually are gets larger and larger. The underlying cause of this is an absence of strong demand.

My table of stock-market sectors continues to show a divide between the Technology Group and the Cyclicals Group. The Technology Group gained 2.51% while the Cyclicals Group lost 0.5%. 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. The 7.6% huge loss in relative strength of the Transportation Sector is also critical because it shows us how weak manufacturing is. Manufacturing makes up less than 20% of the U.S. economy but the effects are felt widely due to all the different types of service companies that support manufacturing.

Stock Market Sectors

Sector Group Sector Contents Sector Aug Sept Oct Nov Dec Jan Feb March April May June July 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 mid June, but gasoline is stronger; it broke its bearish trend line on Tuesday while crude did so on Friday and for a smaller gain.

The 30-year bond has made a symmetrical wedge while the 10-year note broke its bullish trend line in late June. On a longer-term perspective, both the bond and note have been bearish since July, 2016. This is a signal for the stock market to follow within 18 months from last July - or sometime in 2017.

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. Despite the drop, most of the dollar's gains in 2014 are still intact.

Last Issue's Stock Selections:

(See our Trading Tutorial and Historical Trading Results)

My 8.6% gain in July was above my long-term monthly average and above the S&P 500's gain of 7%.

Shorts

DF 8.6%

CTL - not traded

JCP - not traded

Current Stock Selections:

Longs:

No long picks this month.

Shorts:

Goodyear Tire and Rubber (GT)

GT is rated 33 out of 99 by Investors.com and is in the auto/truck tires and misc group ranked 166 of 197 groups. Its last three quarters of earnings was -10% and its three-year sales growth was -8%. The price sank on Friday to move lower than the whole of June and July. The volume was huge. Wait until the dust clears.

Norfolk Southern Corp (NSC)

NSC is rated 56 of 99 by Investors.com and is in the transportation rail group ranked 141 out of 197 groups. Its earnings for the last 3 years was -3% and the 3-year sales growth was -8%. The price has dropped to the May low. Look for entry.

Wells Fargo (WFC)

WFC is rated 48 of 99 by Investors.com and is in the banks - money center group ranked 107 out of 197 groups. Its three-year earnings growth was -1% and its three-year sales growth was 3%. The price was bullish from the end of May until this Friday when the bullish trend line was broken. Look for entry.

Untited States Steel Corp (X)

X is rated 36 of 99 by Investors.com and is in the steel producers group ranked 171 our of 197 groups. Its three-year earnings were not available! Its three-year sales was -19%. The short-term bullish trend was broken on Friday. Look for entry.

Historical Performance

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

Average monthly return: 5.7%

Average 12 month return: 68%

Cumulative return: 875%

On a monthly basis, I have beaten the S&P 500 131 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%.