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stock newsletter, stock picking

April Stock Letter

April 2, 2016

Stock-market earnings have dropped for two strait years, but price goes up.

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Overview

The S&P 500 lost 0.5% in March, the Dow lost 1.4%, but the Nasdaq Composite) was flat. The S&P and Dow started March above their bullish trend channels, dropped through their bottom lines and then inched back up last week. The Nasdaq composite has been in a gradual wedge where the highs did not keep pace with the growth of the lows. It suffered a big loss on March 21, but has recovered every bit of it since then. As this little gain progressed, the bars became increasing smaller at they approached their previous high. This is the opposite of the big steps that is typical action when resistance is broken.

An amazing gain of 6.3% for the Automobiles Sector below shows how much the stock market is divorced from fundamentals. There is a huge oversupply of inventory at both new and used car lots. Recent articles have warned of a 50% drop in used car prices due in large part to leased cars turning into used cars by the thousands. The big drop in the Basic Materials sector of the last two months underscores worldwide deflation that has led to the crash in the price of shipping containers and the bankruptcy of a shipping company. The large drop in the Transportation Sector is indicative of manufacturing weakness. Or, if not weakness then not growth either.

Stock Market Sectors

Sector Group Sector Contents Sector April May June July Aug Sept Oct Nov Dec Jan Feb March Sector Average
Overall graph of strength (cyclicals) versus weakness (staples)
Cyclical Automobiles -2.5% -6.4% -2.1% 4.9% -3.0% 1.6% -4.1% -0.3% 7.1% 6.7% -3.9% 6.7% 0.76%
Cyclical Aerospace 6.7% 0.3% 2.6% -1.3% -1.3% 0.0% 6.8% 6.8% -4.8% -0.4% 1.9% -1.0%
Cyclical Machines 2.7% -1.0% 2.9% 4.0% 0.8% 0.8% 8.2% 7.3% -4.1% -0.1% -1.2% 0.0%
Cyclical Building -3.3% -0.3% -0.4% 3.0% -0.3% -5.1% -3.0% -2.1% 0.7% 3.6% 4.5% 4.0%
Cyclical Leisure 7.7% 8.3% 2.0% 0.4% -0.4% 0.9% 6.6% -3.1% -1.6% 4.1% -3.3% 6.6%
Cyclical Basic Materials 13.7% -5.4% 12.0% 7.3% -11.4% -5.1% 4.6% 19.2% -2.3% 2.7% -2.7% -6.3%
Cyclical Energy 2.4% -3.7% 3.1% -4.5% 2.4% 2.7% -2.4% 0.4% -0.9% -3.9% -5.2% -3.2%
Cyclical Media 4.4% -3.1% -2.9% -2.0% -1.5% 0.0% 3.7% 2.4% 1.0% 1.4% -2.7% 3.0%
Cyclical Real Estate 1.5% -1.0% 1.3% 0.9% -3.9% -5.1% 4.3% -3.3% 1.4% -2.1% -0.3% 1.8%
Cyclical Retailing -2.2% -2.6% 0.6% 0.9% -4.2% -3.6% -0.7% 2.9% -3.9% -1.7% -0.8% 0.0%
Cyclical Transportation -0.9% -3.7% -2.1% -0.4% 2.0% 3.8% 2.3% 10.1% -2.6% 1.6% -0.5% -3.2%
Finance Banks 3.9% -1.3% -7.0% 5.1% 6.9% 0.5% 8.2% 12.5% 0.0% 1.9% 2.6% -6.4% -3.43%
Finance Diversified Financials 0.3% 0.4% -9.2% 6.1% 3.9% 0.4% 2.5% 7.0% 0.6% 0.4% -0.9% -3.0%
Finance Insurance -0.4% 0.7% -3.9% -1.0% 3.9% 3.3% 2.8% 3.9% -0.5% -0.2% 0.1% -0.9%
Staple Cmmcl Svcs & Supplies -1.4% 5.5% -2.1% -0.1% -1.7% -1.6% -0.9% 0.5% -1.1% 2.2% 2.8% -1.8% 0.92%
Staple Consumer 1.0% 2.2% 2.2% -1.5% 0.5% 0.5% -2.9% -6.6% -1.6% 2.0% 1.3% 2.6%
Staple Apparel -3.9% -6.3% 0.9% -2.5% -1.7% -4.7% -3.8% 3.0% -8.7% -12.1% -5.1% 4.9%
Staple Food & Beverage 0.2% 0.1% 3.9% -2.5% -1.7% -2.0% 3.3% -8.4% 2.5% -2.7% -1.8% 1.5%
Staple Alcohol & Tobacco 2.0% 0.0% 4.3% -6.9% 0.8% -0.3% 0.0% -11.5% 0.7% 1.0% 2.3% 1.8%
Staple Health Care 0.5% 1.3% 0.5% 1.2% -5.7% -0.8% -4.6% -0.2% -1.0% -0.7% 1.7% -1.4%
Staple Agriculture 2.1% 5.9% -4.6% -1.2% 5.6% -3.1% 5.9% -5.7% -0.4% 0.7% -1.5% -1.0%
Staple Chemical 4.2% 1.1% -1.9% -1.2% 4.8% -1.0% 2.3% 2.7% -3.0% 2.6% -2.1% -0.2%
Staple Utilities -0.9% 0.0% 6.4% -6.6% -5.5% 3.1% 3.2% -7.7% 2.1% -2.3% 0.0% 1.8%
Technology Pharma & Biotechnology -3.8% 2.6% 0.8% 0.0% 4.5% -3.8% -0.3% -4.8% 0.6% 4.2% 2.9% -1.7% 1.81%
Technology Semiconductors -7.6% 6.9% -2.2% 8.7% 5.4% 4.6% 0.0% -0.8% 2.1% 5.8% -5.2% 6.1%
Technology Software & Services -2.6% -6.5% 1.6% -4.2% 4.0% 3.5% 0.0% -11.3% 1.0% 7.0% -6.4% 5.3%
Technology Technology Hardware -15.1% 11.7% -2.4% 7.4% 4.4% 5.9% -2.7% 0.2% -0.7% 6.2% 4.0% 1.2%
Technology Electronics -2.3% 1.1% -5.5% 1.5% 2.2% 2.3% 0.9% 1.7% 0.1% 6.0% -1.7% 1.8%
Technology Internet -4.2% 1.1% -4.5% 4.6% 1.7% 1.9% 1.4% -8.9% 3.7% 1.9% -1.7% 0.8%
Technology Telecommunication Services -3.5% -2.4% 7.5% -3.1% -4.4% -1.3% -6.8% 1.6% 0.5% -2.5% -5.4% 0.2%

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 and gasoline have been in bearish trends since early January. In March, the price moved under their bearish trend channels, but crawled back inside this week. The energy sector above shows a drop in five of the last six months. March had a huge 6.3% drop. This weakness is due to bloated inventories: http://www.reuters.com/article/us-usa-oil-eia-idUSKBN15U1ZI

Both the 30-year bond and the 10-year note are almost exactly where they were on January 1. But, this is after "rate hikes" by the Federal Reserve. It's the same with the U.S. 5-year note and U.S. 2-year note. Had the "rate hikes" been effective, then the price of the note and bond would have fallen and sent interest rates higher.

There are two scenarios with the U.S. Dollar after it made a high in early January. One is that it started a new trading range. The other is that is in a bearish trend. The trading scenario seems more likely because the dollar broke below the trading range's bottom on February 2 and March 27 only to quickly move higher both times. If the bearish trend is correct, the price will drop below the previous low and stay underneath the bearish trend line. If it's a trading range, it will automatically break the bearish trend line by simply continuing to progress sideways.

Last Issue's Stock Selections:

(See our Trading Tutorial and Historical Trading Results)

My trade in March was a loss of 0.5%. This was better than the S&P 500's loss of 0.8%.

Shorts

VIAB -0.5%

NFX - not traded

GCI - not traded

Current Stock Selections:

Longs:

No long picks this month.

Shorts:

Manitowoc Co (MTW)

MTW is rated 17 out of 99 by Investors.com and is in the machinery - construction / mining group ranked 157 of 197 groups. Its three year sales growth was -26%, its EPS estimate for the last quarter was -153%. There has been a 3% reduction in fund ownership and its sales last quarter was -26%. It has been in a bearish trend since late January. Look for entry as long as the price stays under the bearish trend line.

Macy's (M)

Macy's is rated 2 of 99 by Investors.com and is in the retail - department stores group ranked 196 out of 197 groups. Its three-year sales growth was -3% and the last 3 quarters EPS was -29%. Its sales last quarter was -4%. M has formed a wedge over the last few months as the lows have not kept pace with the fall of the highs. Look for entry when the price breaks below the wedge.

Staples (SPLS)

SPLS is rated 13 of 99 by Investors.com and is in the retail / wholesale office supply group ranked 197(!) out of 197 groups. Its three-year sales growth was -9% and the EPS estimate for the current quarter was -22%. Its EPS estimate for the current quarter was -22%. It has been in a bearish trend since mid December and is now in the middle of the bearish tend channel. Wait until it moves up closer to the bearish trend line, or it makes an obvious signal of weakness.

Windstream Holdings (WIN)

WIN is rated 2 of 99 by Investors.com and is in the telecom services - integrated group ranked 102 of 197 groups. Its EPS in the last quarter was -167%, its 3-year sales was -3% and its sales in the last quarter was -8%. The debt to equity ratio is an amazingly large 5,694%. It has been in a bearish trend since last October. On a short-term basis, it has been bearish since the early March high. Look for entry.

Historical Performance

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

Average monthly return: 5.9%

Average 12 month return: 70%

Cumulative return: 880%

On a monthly basis, I have beaten the S&P 500 129 out of the last 150 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%.