Timing & trends

ETF's: Time to take profits in the industrial sector

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Posted by Don Vialoux - Timing the Market

on Wednesday, 04 April 2012 08:22

This column recommended accumulation of Exchange Traded Funds in the Industrial sector on October 11th for a seasonal trade lasting until Spring. Since then, the S&P Industrial Index has gained 23.9 per cent. What should holders of Exchange Traded Funds and related equities in the sector do now?

The industrial sector includes a wide variety of subsectors including industrial conglomerates, aerospace & defense, machinery, air freight & airlines, road & rail, electrical equipment, construction and engineering and building products. Investors can choose between 24 ETFs that track the sector or its subsectors. Largest holdings in the S&P Industrial Index are General Electric, United Parcel Services, United Technologies, Caterpillar, MMM, Boeing, Union Pacific, Honeywell, Cummins and Emerson Electric.

The industrials sector has a period of seasonal strength from October 9th to May 31st. Average return per period during the past 20 periods was 15.0 per cent. The current period has recorded significantly higher than average returns through actively traded Exchange Traded Funds. Excluding dividend distributions, the Industrial Select Sector SPDR Fund (XLI $37.42) has gained 21.0 per cent, the Vanguard Industrial Index Fund (VIS $69.54) has advanced 20.0 per cent, iShares on the Dow Jones Transportation Average (IYT $93.69) gained 15.5 per cent, the Dow Jones US Aerospace & Defense Fund (ITA $67.13) gained 17.4 per cent and Market Vectors Environmental Services ETF added 14.7 per cent.

On the charts, the S&P Industrials Index has a positive, but deteriorating technical profile. Intermediate trend is up. The Index trades above its 50 and 200 day moving averages. However, strength relative to the S&P 500 turned negative at the end of January and short term momentum indicators started to roll over from overbought levels last week. The Index at 323.52 currently has resistance at 329.29. In addition, several key stocks in the sector including United Technologies, Caterpillar and Boeing broke below technical support levels last week.

The sector is vulnerable to news from first quarter earnings report when they begin to appear next week. General Electric, United Parcel Services, United Technologies and Caterpillar are scheduled to report modest earnings gains on a year-over-year basis while MMM, Boeing and Honeywell are expected to report modest declines. Of greater concern, second quarter earnings guidance released with first quarter reports could be revised lower by several key companies in the sector. Most companies in the sector realize more than half to their earnings from operations outside of the United States. Currency translation into U.S. Dollars at a time when the U.S. Dollar Index is high relative to the same period last year will significantly dampen earnings expectations in the second quarter.

Preferred strategy is to take seasonal profits on Industrial sector Exchange Traded Funds and related equities at current or higher prices.

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 Don Vialoux is the author of free daily reports on equity markets, sectors, 
commodities and Exchange Traded Funds. . Daily reports are 
available at 
http://www.timingthemarket.ca/. He is also a research analyst for 
Horizons Investment Management Inc. All of the views expressed herein are his 
personal views although they may be reflected in positions or transactions 
in the various client portfolios managed by Horizons Investment Management.


Timing & trends

Take Advantage: Choppy Sideways Markets Ending Very Soon

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Posted by Larry Edelson: Uncommon Wisdom

on Tuesday, 03 April 2012 09:11

The markets, all of them literally, have been betwixt and between over the last couple of weeks. Chopping sideways. Looking at times like they are going to break out to the upside then failing. Moving lower, looking like they’re going to literally plunge at any minute. And then holding support and bouncing back.

This is very frustrating action for most traders and investors. However, I will tell you on a positive note that, when you see sideways action like you’ve seen in most of the markets, that of course is usually a prelude to a very big move.

And on another positive note, I do see this betwixt-and-between action — this sideways action — coming to an end very soon, probably by the end of this first week in April.

I want to go to the charts now. First, the gold chart. This is the gold chart that I’ve had up for the past month or so and been using to show you the action in gold. As you can see here, this is the rally that failed in February and failed to give a monthly buy signal.

Gold started to drift lower and is now pretty much in no-man’s land between support down here and resistance up here. I will tell you that the March closing for gold was not bullish, but it wasn’t very bearish either. So that’s indicative that gold is still in a sideways market, drifting lower.

I do expect as I just indicated that we will start to see some action soon in gold and all of my indicators point to a resolution of this sideways action to the downside.


Having said that, let’s now take a look at silver. Silver looks very similar to gold. The rally failed back here, which I showed you. Silver failed to give a monthly buy signal at the end of February. Since then, throughout March we’ve been drifting lower in a choppy, sideways slightly lower action.

It does look at times that silver’s going to collapse; yet it continues to hold support around the $32 level. Like gold, I expect a resolution to this sideways action in silver and very soon, probably by the end of this first week in April.

All of my indicators continue to suggest that another sharp decline in silver is the most likely outcome.


Now let’s move on to the U.S. Dollar Index. Again here, we’ve seen the dollar weaken to test support. But not a very impulsive decline here — rather, drifting lower. It looks kind of sharp on the chart, but it’s been a rather slow decline to support here.

I do believe we will hold this level of support and the next move in the dollar, which should come very soon, should be to the upside.


Now the Dow Industrials. The Dow Industrials are really holding support magnificently ever since we closed above the 12,849 level. The Dow being the only market that gave a monthly buy signal at the end of February, as I’ve indicated to you before, and now it’s consolidating.

Many of my indicators suggest the Dow and the broader stock markets in general are overbought and we should see some kind of correction. If you’re one of my trading subscribers who attended last week’s Resource Windfall Trader webinar, I did indicate to you that Dow 9,100 is now off the table.

I do expect some kind of shakeout in the Dow before the full force of the bull market of the Dow hits. So I wouldn’t be surprised to see a move down in the Dow. But it’s really quite fascinating how the Dow was holding this support area here and looking so rock-solid.


Even if we get a dip, a correction, in the Dow, there’s no question in my mind now that a new, long-term bull market in the Dow is forming. One that I’ve been talking about for some time now, and it will see the Dow and broader stock markets move substantially higher over the next few years as a result of the European sovereign debt crisis and the U.S. sovereign debt crisis.

The money that will be coming out of European bonds and U.S. government bonds has to go somewhere and it’s going to seek out safety, capital appreciation and income in the way of dividends and royalty in the stock market in addition to gold in a safe haven going forward. So keep that in mind.

Stay tuned to all my writings and have a good week.


Timing & trends

Sell in May & Go Away: Should you sell in April?

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Posted by Mark Hulbert, MarketWatch

on Tuesday, 03 April 2012 05:26

Those interested in doing some spring cleaning in their portfolios this month might be tempted to do the most radical spring cleaning of all: Sell everything and go to cash.

That’s because April represents the end of the seasonally favorable six-month period that began last Halloween, and the fast approach of the time when many will “Sell in May and Go Away.” Should you try to get a head start on those who mechanically wait until May Day to do their selling?

To read the full article click here

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Timing & trends

Central Banks Stockpiling Gold & Governments Hoarding Oil

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Posted by King World News

on Monday, 02 April 2012 06:33

With gold and silver set up for a big move this week, today King World News interviewed 40 year veteran, Robert Fitzwilson.  Fitzwilson is founder of The Portola Group, one of the premier boutique firms in the Unites States.  He told KWN that investors need to accumulate key assets while they remain undervalued.  Fitzwilson also said gold, silver and oil are being hoarded by a combination of central banks and governments.  Here is what Fitzwilson had to say:  “It is critical that people distinguish between price and value.  As prices fall and ‘utility’ stays the same, that is what creates greater value.  In the case of oil, gold and silver, not only is the utility holding steady, but it is actually rising.”

Read full article here



Timing & trends

Precious Metals – Silver, Gold, Gold Miner Stocks On The Rise?

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Posted by Chris Vermulen - GoldandOilGuy.com

on Friday, 30 March 2012 08:35

The past couple months investors have been focusing on the equities market. And rightly so with stocks running higher and higher. Unfortunately most money managers and hedge funds are under performing or negative for the first quarter simply because of the way prices have advanced. New money has not been able to get involved unless some serious trading rules have been bent/broken (buying into an overbought market and chasing prices higher). This type of market is when aggressive/novice traders make a killing cause they cannot do anything wrong, but 9 times out of 10 that money is given back once the market starts trading sideways or reverses.

While everyone is currently focusing on stocks, its important to research areas of the market which are out of favor. The sector I like at the moment is precious metals. Gold and silver have been under pressure for several months falling out of the spot light which they once held for so long. After reviewing the charts it looks as though gold, silver and gold miner stocks are set to move higher for a few weeks or longer.

Below are the charts of gold and silver charts. Each candle stick is 4 hours allowing us to look back 1-2 months while still being able to see all the intraday price action (pivot highs, pivot lows, volume spikes and price patterns).

The 4 hour chart is one time frame most traders overlook but from my experience I find it to be the best one for spotting day trades, momentum trades and swing trades which pack a powerful and quick punch.

As you can see below with the annotated charts gold, silver and gold miner stocks are setting up for higher prices over the next 2-3 weeks. That being said we may see a couple days of weakness first before they start moving up again.

4 Hour Momentum Chart of Gold:


4 Hour Momentum Chart of Silver:


Daily Chart of Gold Miner Stocks:

Gold miner stocks have been under performing precious metals for over a year already. Looking at the daily chart we are starting to see signs that gold miner stocks could move up sharply at the trade down at support, oversold and with price/volume action signaling a possible bottom


Daily Chart of US Dollar Index:

The US Dollar index has formed a possible large Head & Shoulders pattern meaning the dollar could fall sharply any day. The size of this chart pattern indicates that if the dollar breaks down below its support neckline the we should expect the dollar to fall for 2-3 weeks before finding support.
Keep in mind that a falling dollar typically means higher stock and commodity prices. If this senario plays out then we should see the market top late April which falls inline with the saying “Sell In May and Go Away”.


Precious Metals Conclusion:

Looking forward 2-3 weeks precious metals seem to be setting up for higher prices as we go into earning season and May. Overall the market is close to a top so it could be a bumpy ride as the market works on forming a top in April.

Chris Vermeulen


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