June 20th, 2008
Something happened today but we’ll have to wait a few days to see if it’s real. The change I’m writing about is the change in the names appearing on the various scans I run. You may remember a couple of posts recently where I talked about what appeared to be some industry rotation and some new non-energy names sneaking on the scan lists. The amazing thing today is that most of the names on those scan lists were new and, with today’s 4-5% decline in the price of crude and the move to eliminate oil subsidies by China, energy stocks took a drubbing.
Whether it was scanning for 12-mos. or 4-yr. New Highs or stocks with Momentum or high Relative Strength … didn’t matter, the names were new and crossed many industry groups. Oil stocks tanked making room for new names to rise to the surface. Here are a few whose charts caught my eye as having favorable entry points today:
- ASMI (ASM International)
- WOR (Worthington)
- CTSH (Cognizant)
- KNSY (Kensy Nash)
- PSYS (Pschiatric Solutions)
- URBN (Urban Outfitters)
- ANST (Ansoft)
- PEGA (Pegasystem)
- AAP (Advance Auto Parts)
As I make small initial commitments in many of these, I still keep one eye trained on the S&P 500 Index … I just hasn’t clear the significant hurdles that would signal a green light, an all-clear, a “jump in, the water’s great” signal.
I think back to my post over a month ago on May 8, titled “A Game Plan for Today’s Market“. If you remember back (actually, you don’t need to because the chart of the Index is available by clicking here), the market had just march up from its March 17 low of 1276.60 to 1418.26 on May 6. All the talking heads were saying that a bottom had been put in and that the terrible storm had been weathered. It was O.K. to buy stocks hand over fist again.
A week later, the Index failed to remain above the 180-day moving average and has since declined 5.3% to today’s 1342.83 close. I outlined in that post a strategy that seems to have even more merit today than it did on May 8:
“……what expectations should we have so we can absorb the disappointment and neither panic nor get carried away by all the empty hype?
The answer seems simple:
- Don’t expect a booming market just yet.
- Try to make money in what’s been winning so far: energy (oil&gas, coal and other alternative fuel sources), rails and transportation, steel and basic materials, food
- Stick your little toe into some of the emerging industry groups (more on that soon).
- Keep a big proportion (over 50%) in cash for whenever a clear signal is issued.”
I’d tweak this prescription only slightly be lightening up a bit on the previous winners (oil & gas, et. al) and adding to my sliver (SLV) position. This is a position I encouraged on June 6 and today add in support an article written by our friends at Self-Investors entitled “Gold & Silver Breaking Out?”