September 12th, 2012

Fundamentals Trumped Technicals in XHB; Avoid Mistake in XLF

I could kick myself.  I allowed what people said was the fundamental realty get in the way of clear contrary picture in the charts and it cost me a bundle.  Not real dollars but only an “opportunity cost” for not having put my money to work there; but it hurt almost as much regardless.  I’m talking about the near perfect bottom reversal patterns that most home builders were building over the past three years and from which most broke out during the first quarter.

At the end of 2010, the home ownership affordability index (the number of Americans who could afford purchasing a home) was nearly the highest ever recorded.  According to a February 2011 RISMedia report:

“Nationwide housing affordability during the fourth quarter of 2010 rose to its highest level in the 20 years since it has been measured, according to National Association of Home Builders/Wells Fargo Housing Opportunity Index (HOI) data. The HOI indicated that 73.9% of all new and existing homes sold in the fourth quarter of 2010 were affordable to families earning the national median income of $64,400. The record-setting index for the fourth quarter surpassed the previous high of 72.5% set during the first quarter of 2009 and marked the eighth consecutive quarter that the index has been above 70%. Until 2009, the HOI rarely topped 65% and never reached 70%.”

And yet, most of the talking heads and business media throughout 2011 and 2012 continued to look at home prices and sales statistics and wonder whether and when housing would hit bottom.  For example, USNews on April 26 reported:

Is the housing market in good shape or is it retreating back into recession territory? That’s the question on many observers’ minds as they try to sift through several reports this week that gave a somewhat murky picture of the state of the housing market…..Just this week, the widely followed Case-Shiller Home Price Index showed that values continued to erode in many metropolitan areas, with prices falling to a near-decade low nationally. Several cities registered new post-crisis lows on the index, further evidence that the “housing market bottom” remains elusive.Sales of new homes also disappointed this week, dropping more than 7 percent in March after a healthy gain in February. Overall, sales are still way short of the 700,000 or so units experts consider evidence of a “healthy” housing market.

So I continued to be leery of the home building stocks even though I’d been following and writing about them for some time.  Way back in May 2011 I called homebuilders and financial stocks the economy’s missing fourth wheel saying “If you believe that these two sectors will be able to successfully cross their resistance hurdles and begin advancing to levels last seen in 2008 then you should be “all-in” believing the market will continue heading towards the all-time high.”  I reposted that blog in January 2012 saying “If those groups [homebuilders and financials] start advancing this time, the rest of the market may not be much far behind.”

I must confess I was scared off by the various fundamentalist-based talking heads who kept looking at the trees (i.e., home prices and sales statistics) and therefore couldn’t see the forest (gaining momentum in homebuilding stocks).  I should have stuck with the charts and jumped on the unbelievable, steady move in homebuilding stocks which are up 45% this year, about the most of any industry group:

Last month I wrote that money flow is beginning to be “directed into financial stocks gives hope that, absent a new major crisis (although our own Federal debt and budget debate is still looming on the horizon), the market will be able finally to continue to the previous all-time highs and ultimately break the grips of the 12- going on 13-year secular bear market.  A cross of the XLF above 16 will trigger for me the another clear indication that financials will begin leading the market higher.”  I can report that XLF is making progress in its base-building and edging closer to the breakout level:

I missed out on that very clear-cut opportunity but don’t plan to miss the new one in the financials.

 

August 21st, 2012

Stock Market Recover Sidetracked by European Sovereign Debt Crisis

I think one of my most prescient posts was entitled Housing and Finance: Two Superimposed Crises and Bear Markets of September 17, 2010, almost exactly two years ago and just before the last mid-term elections.  The market had already bottomed the previous March and were breaking above what I saw as an inverted head-and-shoulder interim bottom.  As noted in the post,  there appeared to be the beginnings of a bottom in the housing market due to once-in-a-lifetime affordability.

Specifically, I envisioned the market being victimized for the first time in history by two economic crises: financial crisis hitting banks and other financial enterprises plus the housing crisis hitting consumers.  I suggested that before the market can advance to new highs, both these industry groups would have to bottom and begin moving higher.  The keystone of that post was the following chart on which I attempted to visually superimpose the impact of those two crises on the stock market:

Here we are, two years later, with the market having ground 24.6% higher from 1126 to 1420 today.  I wrote then:

The reason the market appears to be bottoming again (the inverted head and shoulders) may perhaps be that housing is beginning to bottom and turn also. The number of foreclosures continues to rise (although at a lesser rate than last year) and the improved affordability index (historic low mortgage interest rates and closeout prices of houses) has not yet stimulated a pickup in the housing sales turnover. But a pickup may be around the corner [triggered by an up-tick in interest rates?]. Without a turnaround in housing, the stock market recovery will be short-lived.

Unfortunately, I didn’t have sufficient courage to invest in homebuilders and missed out on the Industry Group with one of the biggest moves over the past twelve months, Homebuilders, at 75%:

We thought our Financial Crisis had been contained by the Fed’s first round of Quantitative Easing and that banks would begin their recovery however the effort was sidetracked because of the European Sovereign Debt Crisis beginning towards the end of 2009.  The recovery in the stocks of the country’s larger banks began to falter towards the beginning of 2010 and only now has begun to show signs of renewed life:

The “herd’s” big money flow again beginning to be directed into financial stocks gives hope that, absent a new major crisis (although our own Federal debt and budget debate is still looming on the horizon), the market will be able finally to continue to the previous all-time highs and ultimately break the grips of the 12- going on 13-year secular bear market.  A cross of the XLF above 16 will trigger for me the another clear indication that financials will begin leading the market higher.

It’s been a long, frustrating two years.  We’re facing another national election, this one even more important than the last.  Continuing to look at all the negative news continues to make our investment lives feel dismal.  Seeing the possibilities of some positive news for a change opens the mind to a totally different stock market future than the one we have become accustomed to.  I may be nothing more than an incurable optimist but that’s the best way to remain committed to the stock market and, ultimately, long-term financial well-being.

January 19th, 2012

Revisiting Housing and Banking With a New Ending

There was much conversation today about how the housing and banking industry was leading the market higher ….. which reminded me of a post I made close to a year ago on May 11, 2011 entitled “Homebuilders and Financials: The Economy’s and Market’s Missing Wheel“.  The S&P 500 closed at 1342.08 that day, 2.06% above today’s close of 1314.50.  I concluded that piece by saying

“If you believe that these two sectors will be able to successfully cross their resistance hurdles and begin advancing to levels last seen in 2008 then you should be “all-in” believing the market will continue heading towards the all-time high. If not, stay on the sidelines because rather than riding a car to the top it would be like riding a three-wheeler powered by the rest of the economy including: healthcare, retail, tech & internet, commodities, industrials and consumer non-durables.”

Because of the new more constructive view of housing and banking with the hopes of continued advances for stocks in those groups, I repeat that blog, including those charts, below:

====================================================================

Two Industry Groups stand in the way of further market advances: financials and homebuilders.

Home building industry spokespeople go on CNBC regularly each time of the housing statistics are announced, like monthly sales, financing and refinancing, starts, or permits issued. And the spokespeople each time differentiate between the sales of new homes and resales, especially those that are in foreclosure or underwater; they also attempt to differentiate between national statistics which include negative information from extremely skewed markets like Las Vegas, Phoenix and Florida and the rest of the national housing market.

Discussed less frequently are conditions and prospects for banking, insurance, asset managers and the rest of the financial industry group. Since the bottom in 2009, I have believed the sector was a key to launching a true bull market:

  • On 3/20/09 in Financial Stocks are Laggards I wrote: “It’s often said that financial stocks are the Industry Group that leads the market out of the average Bear Market. In this case, however, the financials not only lead us into the Bear Market but they were the principal cause.
  • On 5/18/09 in XLF (Financial Sector ETF): What Now? I wrote: “XLF seems to be making what looks like the beginning of an inverse head-and-shoulder, a stock pattern that looks similar to the S&P 500 Index pattern….There’s only a one-in-four chance that XLF will be able to cross the resistance at the 13.00 neckline allowing it to move up to 17.00. It’s almost certain that 12-18 months from now XLF will be double what it is today [closed at 12.29 on that day], we just can’t say when.
  • On 6/7/2009 in XLF (Financial Sector ETF) = Market Health I wrote: “…the key to solidifying the market’s turn, to a true change in momentum from bear to bull is financial stocks starting to move up…..The financial sector is tied up with economic health, exchange value of the $US, interest rates and the health of the financial system itself. I’ll rest easier when I see the XLF successfully and with conviction cross above it’s neckline. “
  • On 9/16/10 in Housing and Finance: Two Superimposed Crises and Bear MarketsI wrote: “[The] graph clearly depicts what I see as two coincidental and superimposed Crises the country has faced. We often see them merged into one continuous stream of bad news but, in reality, there was a Financial Crisis (impacting business) that was preceded by Housing Bubble and Bust (impacting consumers).” and inserted the following graph, now updated to last night’s close (click on image to enlarge):

A year later, while the rest of the economy has regained its footing enabling the market to push higher (up nearly 20% since then), those two industry groups are still stuck below significant resistance and unable to breakthrough and push significantly higher:

  • Homebuilders
  • Financials

If you believe that these two sectors will be able to successfully cross their resistance hurdles and begin advancing to levels last seen in 2008 then you should be “all-in” believing the market will continue heading towards the all-time high. If not, stay on the sidelines because rather than riding a car to the top it would be like riding a three-wheeler powered by the rest of the economy including: healthcare, retail, tech & internet, commodities, industrials and consumer non-durables.

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If those groups start advancing this time, the rest of the market may not be much far behind.

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January 4th, 2012

Preliminary Positive Signs on Banks and Financials

A market timing strategy sometimes recommended by professionals like Fidelity Investments assumes that the various phases of the stock market’s life cycle correspond roughly to the stages of an economic business cycle.  To aide investors following the strategy, they developed the following schematic which overlays a typical economic cycle, the market life cycle phases corresponding to the various economic sectors and the industry groups that typically tend to perform best in them.

In the Financial Crises Crash, financial stocks was one of the first (after homebuilders) and most beaten down of all the Industry Groups having come under new, intense Federal scrutiny, regulation and restructuring and, up to now, the stocks have been slow to recover.  But their time may be coming.  The XLF (Financials ETF) appears to be struggling to form a small reversal bottom with a neckline at 14.00 which if crossed could carry the stock to the next resistance at 17.00:

The XLF is comprised mostly of the larger-cap, money center banks and insurance companies (click here for the current list of top holdings).  The ETF of smaller regional bank stocks, RKH, looks similar and the the various IBD regional bank groups are continually advancing in their ranking among the 197 Industry Groups.  Two examples of groups moving higher and above their 20-week moving average are the Midwest and Southwest banks:


If these aren’t apparitions but inklings that the financials are actually beginning a recovery reversal then the market may also finally begin to break out of it’s long trading range, emerge from its funk and begin an assault somewhere down the road on it’s all-time time high.

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December 1st, 2011

Avoid the Siren Calls of Sloping Trendlines of Hope

It’s time for a little “chartology”, a primer in chart reading.  Of course these opinions are personal but they are based on many years of hands on experience making successful use of and, sometimes, being disappointed by charts.

At the beginning of November, in a piece entitled “Sloping or Horizontal Trendline: Which Is More Reliable“, I wrote:

“if I have to chose between an ascending (or descending) trendline and a horizontal one to drive my decisions I would look to the horizontal one. I can’t easily calculate where the trendline will be a month or two out. But I can easily see whether there are any horizontal trendlines that mark where buyers and sellers have traded places for control of a stock’s trend. Those are the transfers of power that I rely on to help me anticipate what might be ahead for a stock (or Index).”

Another perfect example presented itself today when a fellow blogger Springheel Jack wrote a piece on the Slope of Hope about the prospects of a break out in the much maligned and downtrodden financial sector (primarily, banks).  According to a chart presented by Jack, there is a descending trendline from the pre-Financial Crisis top in May 2007 to the failed attempt to move higher this past spring.  In addition to descending trendline, chart also shows Price/Volume bars with struggle for power between the 14-16. Resolution of that struggle will signal either beginning of trend reversal or consolidation for further move down.  The chart with his annotations was:

Descending trendline

From Springheel Jack at Slop of Hope

My chart of XLF and its resistance trendlines looks like this:

Note:

  1. Any number of sloping trendlines could have been draw over the past two years which failed to generate a trend reversal.
  2. There are several horizontal trendlines at key price levels that have over the past several years acted as pivot points the barred further recovery in XLF.  Currently, that level is 13.50 followed by another hurdle at 15.50 and, finally, a breakthrough that would mark a true momentum trend reversal at 16.60.
  3. Rarely are ascending supporting trendlines mentioned but there is one stretching from the March 2009 bottom to the low last Friday.  That ascending trendline carries about as much significance as Springheel Jack’s descending one but, if you need an exit point that marks failure it would be the stock violating that ascending trendline.

Bottom line, don’t be swayed by the siren calls of commentators singing the song of descending sloping trendlines.  Look for the horizontal walls of resistance which if scaled truly marks an escape from a trading range trap.

May 19th, 2011

Homebuilders and Financials: The Economy’s and Market’s Missing Wheel

Two Industry Groups stand in the way of further market advances: financials and homebuilders.

Home building industry spokespeople go on CNBC regularly each time of the housing statistics are announced, like monthly sales, financing and refinancing, starts, or permits issued. And the spokespeople each time differentiate between the sales of new homes and resales, especially those that are in foreclosure or underwater; they also attempt to differentiate between national statistics which include negative information from extremely skewed markets like Las Vegas, Phoenix and Florida and the rest of the national housing market.

Discussed less frequently are conditions and prospects for banking, insurance, asset managers and the rest of the financial industry group. Since the bottom in 2009, I have believed the sector was a key to launching a true bull market:

  • On 3/20/09 in Financial Stocks are Laggards I wrote: “It’s often said that financial stocks are the Industry Group that leads the market out of the average Bear Market. In this case, however, the financials not only lead us into the Bear Market but they were the principal cause.
  • On 5/18/09 in XLF (Financial Sector ETF): What Now? I wrote: “XLF seems to be making what looks like the beginning of an inverse head-and-shoulder, a stock pattern that looks similar to the S&P 500 Index pattern….There’s only a one-in-four chance that XLF will be able to cross the resistance at the 13.00 neckline allowing it to move up to 17.00. It’s almost certain that 12-18 months from now XLF will be double what it is today [closed at 12.29 on that day], we just can’t say when.
  • On 6/7/2009 in XLF (Financial Sector ETF) = Market Health I wrote: “…the key to solidifying the market’s turn, to a true change in momentum from bear to bull is financial stocks starting to move up…..The financial sector is tied up with economic health, exchange value of the $US, interest rates and the health of the financial system itself. I’ll rest easier when I see the XLF successfully and with conviction cross above it’s neckline. “
  • On 9/16/10 in Housing and Finance: Two Superimposed Crises and Bear Markets I wrote: “[The] graph clearly depicts what I see as two coincidental and superimposed Crises the country has faced. We often see them merged into one continuous stream of bad news but, in reality, there was a Financial Crisis (impacting business) that was preceded by Housing Bubble and Bust (impacting consumers).” and inserted the following graph, now updated to last night’s close (click on image to enlarge):

A year later, while the rest of the economy has regained its footing enabling the market to push higher (up nearly 20% since then), those two industry groups are still stuck below significant resistance and unable to breakthrough and push significantly higher:

  • Homebuilders
  • Financials

If you believe that these two sectors will be able to successfully cross their resistance hurdles and begin advancing to levels last seen in 2008 then you should be “all-in” believing the market will continue heading towards the all-time high. If not, stay on the sidelines because rather than riding a car to the top it would be like riding a three-wheeler powered by the rest of the economy including: healthcare, retail, tech & internet, commodities, industrials and consumer non-durables.

December 21st, 2010

Racing Against The Hedge Funds

I was interested to read that hedge funds have found the past year as trying as I did. The headline on Marketwatch.com was In risk-on, risk-off year, hedge funds come up short” and the lead paragraph stated that

“Several of the largest hedge funds lagged the return on equities and bonds this year as big market swings combined with massive monetary stimulus to disrupt trading strategies.?”

An index of managers compiled by Chicago-based Hedge Fund Research Inc. rose 7.11% this year, through the end of November and early December as compared with a 7.88% gain in the S&P 500 Index. Those hedge funds that only invest in equities returned even less at 6.89%. The article went on to point out the returns up to the beginning of December for some of the larger and better-known all equity head funds:

  • Viking Global Equities was up less than 3%
  • Paulson & Co.’s Advantage fund climbed 1.8% this year
  • Paulson & Co.’s Advantage Plus fund, which uses a small amount of leverage, gained 3.68%.
  • Brevan Howard Fund, a giant global macro hedge fund, returned 1%.
  • Moore Global, another global macro fund, was up 2.5%
  • King Street Capital, a big credit-focused fund, advanced less than 5%.
  • Och-Ziff Capital Management’s Master fund,gained 7.63%.
  • Oculus fund was up just over 6%.
  • Tudor BVI Global advanced 5.4%.
  • York Investment was up 5.8%.

One of the factors contributing to the less than stellar performance of many hedge funds this year were this year’s violent market swings. However, this news came as a relief to me because my portfolio has outperformed the market and, apparently all these highly compensated hedge funds.

The following chart shows two indexes: the S&P 500 in red and the model portfolio my subscribers see in my Instant Alerts service:

Both indexes start at 1.0 with the launch of the service last March 17. As of last Friday (I issue a weekly Recap Report each Sunday), the portfolio was up 8.8% as compared with a 7.3% increase in the S&P 500. It was tough going until just after Labor Day when I reversed direction and started buying. You read about it here on September 2, when I wrote:

“I know I’m going to be criticized yet again for being too optimistic or pallyannaish but I’m looking forward to the possibility …. now perhaps 60/40% …. that the market also will hit and cross above the major, long-term descending trendline that stretches all the way back to October 2007.”

And two weeks later:

“…. the market timing indicator gave an “all-in”, 100% invested signal back on September 2 with the index crossing above the 50-dma ….. I’ve struggled against skeptics …. one of my harshest critics, continually asks me to explain to her why the market should advance in the face of continued bad economic news …… The only way I can respond is to say “stay tuned, the media will tell you why something happened after it happens … and then will call it news”…… the problem isn’t knowing which stocks to buy as much as knowing how much to invest and when. There are more great stocks out there to buy (like there were in March-May 2009) than money to buy them. What is in short supply is guts to do it.”

Finally, at the end of September, when asked why I buy stocks making new highs, I wrote:

“When the stock market is moving from a trough or consolidation into an uptrend and I have cash to invest, one of my primary means of employing that cash is to buy stocks making all-time new highs.”

That’s looking backwards; the question everyone wants answers to is what the future holds. I recently pointed to several areas where I’ve bought stock:

  1. Tech stocks will probably continue to be strong in the first half. See “Inverted Head-and-Shoulder Potential on NASDAQ Composite“; the NASDAQ composite is up 12.8% since that post.
  2. There’s “The Resurrection of Financials“. Have you seen what XLF has been doing over the past several days?
  3. Finally, how about “Steels: Your Second Chance“. The five steel stocks in that post are up an average of 4.84% over three trading days and none are down.

There will be new opportunities as the New Year rolls in so stay tuned and subscribe.

December 9th, 2010

The Resurrection of Financials

It’s not pleasant but take yourselves back to those dark, frightening, gloomy days of Winter 2009 when it looked like our financial world was coming to an end. Many bank stocks had imploded and were selling in single digits:

Perhaps the best depiction of the devastation caused to financial stocks is XLF, the group’s ETF:

From a high of 38.15 on Memorial Day 2007 to a low of 5.88 at the low on March 9, 2009, the ETF declined 85%. Were you among the few “gamblers” left who couldn’t pass up the opportunity of buying the American banking system at closeout prices? Don’t feel bad, few of us were.

As the market rebounded off the low in March, so too did the financials. Within 6 months, the ETF nearly tripled from those low distress prices and we were all kicking ourselves for lack of foresight and having missed what was a “once in a lifetime” opportunity.

But there were lingering doubts, concerns about a double-dip recession, continued high unemployment, additional rounds of Federal government and Fed stimulus, concerns about new banking regulations, tax uncertainties. Stocks, including the financials, may have bounced off the bottom but for over a year they have been mired in a horizontal trading range.

If the market does advance during the first half of next year to 1320 as I suggested earlier (see”Listen to One Opinion or the Sound of the Thundering Herd“) then it will only be able to do so if the financial stocks also make their move. Over thirty years ending in 2007, the financial services sector grew more rapidly than any other US industrial or service sector to became the largest US equity market sector representing 21% of the capitalized value of the S&P 500 Index; today, the sector represents 15% of the S&P 500 Index.

More and more pro’s are calling for a strong market next year. Byron Wein has been added to the list by saying yesterday on Bloomberg that “The index will extend the advance into 2011 and may reach its all-time high of 1,565.15 from October 2007″. If that happens then financials could turn from being the riskiest to one of the least risky industry groups to have some money invest.

(As subscribers to Instant Alerts know, I tipped my toe into those waters today and bought financial stocks for the first time in over three years in anticipation of and hopes for a substantial long-term …. 6-12 month …. appreciation.)

March 6th, 2010

Your Watchlist – Part 4: Stocks with Good Charts

On November 9, in “One View of Market’s Future”, I accurately predicted the market would stall at 1150 and laid out the following game plan:

  • The market begins to stall out in December as:
    • the door for the sidelines-money slams shut for the year
    • tax selling begins to capture losses and record gains in anticipation of possible higher 2010 tax income rates
  • The 1150-1200 is a critical area for past pivot points where the market turned in 1998, 2001, 2002, 2004, 2005, 2006 and 2008. These pivots occurred both when the market was trending up and down.
  • The turn is usually caused by an economic catalyst and one that could fit the bill perfectly would be:
    • The $US Dollar firming and possibly reversing its descent.
    • The “Soft Dollar Trade” (buying foreign currencies, gold and commodities), considered by many as “over-crowded”, begins to unwind and the market begins to decline.
  • A logical target for the bottom of this correction is the neckline of the market’s inverted head-and-shoulders bottom, or approximately 950 in the S&P 500, a 17% decline from the high.
    • The decline falls within the definition of a correction falling short of the 20% required to considered a “Bear Market”.
    • The Index will find support on the 200-DMA, the crossing of which is a key indicator identifying Bull and Bear Markets
    • The 200-DMA will have crossed the 300-DMA by then
    • The 300-DMA will have turned up, the final hurdle before the book on the Crash can be finally closed.

Now, four months later, that forecast appears to have been unbelievably accurate, if I do say so myself. The market peaked in early January at 1150 and the dollar has appreciated 7.18% against a basket of other currencies (.DXY).

One element, however, has failed to materialize – the shape and depth of the correction. Rather than the long awaiting 10-20% correction similar to the one in 2004 that many were expecting, there’s been a lateral, horizontal correction; does that qualify as a correction at all? Fortunately, I also outlined an incremental strategy for handling the correction when it came (see “Market Dominoes Beginning to Fall” of January 26) and, so far, the market’s resilience and knocking over only the first few the dominoes has prevented us from moving very far into cash.

Applying that same incremental approach to a market perhaps about to cross above 1150 and resume a bullish run (remember, our expectation that the next leg up would begin in Sept-Oct rather than now; see “Mid-term Elections in 2010 and the Stock Market” of January 28), we began assembling ideas for a watchlist. The final group consists of 109 stocks that have clear consolidation patterns out of well-formed bottom reversal patterns. After breaking above necklines or other resistance trendlines, many appear on the verge of breaking out of long consolidation patterns (channels, wedges, etc.) that carried the stocks back down to test the trendlines.

Many are asset managers, insurance, credit management and, surprisingly, REITs. The following are merely offered as typical examples. For a complete list, click here (click on image to enlarge):

  • AB (Alliance Bernstein)
  • LRY (Liberty Property Trust)
  • WRI (Weingarten Realty)
  • CBG (CB Richard Ellis)
  • BXP (Boston Properties)
  • BKD (Brookdale Senior Living)
  • CNA (CNA Financial)

I must confess, this is my favorite among the four groups because there are so many excellent charts to pick from, many paying unusually high dividends and some already having begun climbing to new heights.

December 17th, 2009

Those Other "Banks"

While we’re all sitting around waiting for the wind to pick up (if you don’t know what I’m referring to you didn’t read yesterday’s posting) you might want to take a look at a little corner of the financial world, some of the companies on the Credit Services Industry Group. If we were on Wall Street’s sell-side (those are the guys who go out and pitch stock ideas to institutional investors) we might make up favorable stories about:

  • the improving economy allowing these stocks to be on the verge of making a comeback, or
  • these companies stepping into to fill the gap that’s opened as a result of the real estate lending problems of the banks, or
  • the continually increasing slope in the yield curve offering these lenders’ profit margin improvement for the first time in several years.

But if we’re technical analysts who look at the charts, we might see accumulation taking place. We might see that the excess supply of stock is being absorbed into stronger hands and enabling these stocks to show some signs of emerging upward price momentum.

Here’s what I’m talking about:

  • CACC (Credit Acceptance Corp): An auto loan provider that has just broken into all-time new high territory. [in full disclosure, I just purchased the stock]
  • EZPW (Ezcorp): small consumer loans through pawn shops (also sells merchandise forfeited by borrowers). Stock has been in a horizontal channel for nearly 3 years. An upside breakout would put stock in all-time new high territory.
  • FCFS (First Cash Financial): another pawn shop operator. Stock is also about to break into all-time new high territory
  • NEWS (Newstar): provides debt financing solutions to middle-market businesses and commercial real estate borrowers. Stock is close to completing an ascending triangle reversal bottom pattern.
  • SLM (SLM, the old Student Loan Marketing Co., or Sallie Mae): loans to …. students
  • STU (Student Loan Corp): competitor in student loan market

Needless to say, I selected these stocks strictly because of their interesting charts; further research and discrimination among them I leave up to you.