January 6th, 2015

Forget Oil, Go Lithium

GigafactoryOil prices has tumbled more than 50% since the beginning of last summer so many investment advisers are recommending today that investments be made in the energy sector, arguing that the stocks have fallen so that many represent the best bargains in many years.

If you had been able to predict the oil price rout in July and sold short, you would have discovered that not all energy-related stocks and ETFs acted uniformly. Some actually went up (EEP up 12.49%, VLO up 1.68%) while others dropped anywhere from -5% to
-70%. For example, CVX decline -16.81%, COP declined -19.33, OIL -49.48, RIG -56.39 and CRK -73.99.

If you believe that oil prices can’t go much lower and will soon rebound then it would seem logical that buying an oil-related stock is a “sure thing”. But how does one select among the more than 300 energy stocks of all sizes, dividends, volatility, growth.

Oil Prices

Should you select those that performed the “best” over the past 4-5 months under the assumption that they will perform best in the future. Or, conversely, should you buy those that performed the worst because they could possibly bounce back the most. If you’re looking to put money to work, though a better strategy than catching one of 300 “falling knives” might be to look someplace totally different, someplace that will be “driving the future” rather than the energy that has “driven the past” (no pun intended).

Rather than betting on a recovery in oil prices, why not take out a stake instead in the industry making possible electric transportation – lithium, one of the most valuable natural resources of the new electronic world thanks to its unique and extremely valuable characteristics:

Lithium

As described in a recent Mauldin Economics report:

  • Lithium has such a low density that it floats on water and can be cut with a butter knife. When mixed with aluminum and magnesium, it forms lightweight alloys that produce some the highest strength-to-weight ratios of all metals.
  • Lithium tolerates heat better than any other solid element, melting at 357°F.
  • Lithium batteries offer the best weight-to-energy ratio, making lithium batteries ideal for any application where weight is an issue, such as portable electronics.
  • That same high energy density and low weight characteristic makes lithium batteries the best choice for electric/hybrid vehicles due to car gas mileage. A car’s biggest enemy is weight.
  • Lithium has a very high electrochemical potential, meaning that it has excellent energy storage capacity.

The lithium market is dominated by only three publicly-owned producers:

  1. Chemical & Mining Company of Chile (SQM);
  2. FMC Corp. (FMC);
  3. Rockwood Holdings (ROC)

Lithium Industry

In addition to its excellent dividend yield and relatively low (as compared to the pure-play ROC) price-earnings ratio, the SQM chart is most volatile and shows promise to bounce off the bottom of the horizontal channel it’s formed since late 2013 and attempt to cross above the upper boundary at 33, a 40% move.

SQM - 20150105

Tesla has just completed a gigafactory that exceeds all comparisons in the belief that the lithium-ion battery will be the power source for many more battery powered cars, drones, toys and power grid storage.  I’m hoping that SQM will benefit from that future.

October 16th, 2012

KOL and UNG: the First Chapter

I’m not breaking any new headlines here but the Fed has flooded the economy with a huge amount of liquidity.  To this point about the only thing I focused on with regard to all that money sloshing around is to wonder when it might come in to the stock market.  Consequently, I missed the surprising new boom that’s emerged in housing and most related industries like lumber,construction equipment and tools and home related retail.

But sooner or later all that newly created money should begin to show up in commodity prices (other than precious metals), inflation statistics and, finally, in interest rates.  We may have gotten a peek at that future this morning when the government reported that industrial production rose 0.4% in September while capacity utilization inched ahead from 78.0% to 78.3% and copper rose 0.5% on the commodity exchange.  It may be time to take a look at a couple commodity ETFs.

  • UNG (Natural Gas): I swore off of natural gas having been burned by it (no pun intended) several times over the past few years as I bought mistakenly believing that the commodity just couldn’t drop any further in price only to have been proven wrong.  Perhaps it might be one of the instances again:What a huge destruction of value!  If you had put $1000 into UNG when it first became available and held on for the duration, you would have been left with a measly $54.80.  There’s not much hope in recouping all that money any time soon but, if you want to put $1000 in UNG today, you could have a fairly good chance of perhaps doubling it.  For the first time in many years, UNG is in the process of forming a reversal bottom pattern.  The 50-dma has crossed above both the 100- and 200-dma’s and the 100-dma has also crossed above the 200-dma.  Volume has picked up significantly due to many bottom fishers who are now betting on that bottom taking place.  There still are many skeptics out there so if a reversal is truly in the making then it will probably go through many stages and stretch out for years.  Along the way, there will be several constructive trading opportunities …. a long-term buy-and-hold approach could be frustrating.
  • KOL (coal): Coal is the bad boy of the energy complex but, with the possibility of a Romney victory, may gain some new found respect in the effort to become energy independent.Like the case of UNG, KOL is in the early phases of a clear-cut reversal pattern.  The upside opportunities may not be as significant as UNG (because the previous decline wasn’t as severe) but, as a more mature industry, they may be more certain.

Of course,one can play the natural gas and coal producers instead of the ETFs and there always are the precious metals (GLD, SLV, GDX) and their producers.  Clearly, this is a long-term unfolding story that we’ll continue to follow.

October 12th, 2010

Inflation Now, Deflation Then; What to Do?

A subscriber to Alerts asked the following: “There has been some talk that the world economy is on the brink and the United States will soon be devaluing currencies…..what would the repercussions on US stocks be?”

I answered as follows:

“The US government (without explicitly saying so) hoping for and helping the $US drop in value against other currencies (especially, the countries that lend to us). I’ve been anticipating for some time this “rush to the bottom” in international currencies (and the coincidental increase in value of all commodities from precious metals to foods). We want either: the $US to drop or the Chinese Yuan to increase in relative values because that’s the only way we can reasonably pay off the national debt (have more dollars in circulation, make them less valuable, pay off in cheaper dollars). Our cost, in the process, is that our salaries and compensation also devalues against workers in other countries.

The ramifications on stocks and economy is extensive but not necessarily balanced:

  1. Everything we import will increase in cost including: oil, TV sets and electronic goods, cars, steel, food stuffs, clothing, etc, etc. The list is endless. Retailers of these items may benefit in the short run from increased margins but would suffer in the long.
  2. Foreigners will flood the country for companies, houses and real estate, nearly everything else we have of value that they may want to buy.
  3. Companies that export their production should do extremely well because their products will be cheaper around the world.
  4. There could be labor unrest as workers look to get wage increases to offset the higher commodity costs igniting an inflationary spiral.
  5. No one will want to own our debt for a while because of fear that there would be additional devaluations.
  6. Interest rates would shoot up like a rocket from today’s ridiculously levels to ridiculously high levels down the road
  7. Rather than being a creditor to the US Government, now’s the time to become a borrower yourself – if you have a reliable, steady source of income to support it.”

Wasn’t it just two or three months ago that we were told to fear deflation. Know the talk has swung 180 degrees to inflation. There wasn’t much you could do to protect against the consequences of deflation but, with the introduction of commodity ETF’s, you now can lesson the adverse impact of inflation on you. Of course there’s always precious metals and energy. But if you’re anxious about the prospect of inflation impacting your everyday like, take a look at what the following commodities-related ETFs have already down over the past 2-3 months (click on symbol for chart)?

  • KOL (Coal)
  • JJN (Nickel)
  • JJC (Copper)
  • PALL (Paladium)
  • SLX (Steel)
  • SGG (Sugar)
  • DBA (Agriculture)
  • JJA (Agriculture)
  • RJA (Rogers Agricultural Commodity)
  • DBC (Commodity)
  • MOO (Agribusiness)

If you ask which were the best, I would tell you that I’d pick from among the most volatile.

May 26th, 2010

Why Gold Prices Aren’t Rising

There’s much conversation these days about how commodity and precious metals prices have stalled or even declined (as represented by their respective ETFs) with the slow down in the worldwide economy and volatility in international currencies and financial markets frequently being given as the explanation.

At times like these, wealth’s tendency is to reduce risk (i.e., sell assets) and seek safety. Since the locus of today’s uncertainty is the EU, one such safe-havens appears to be the $US, causing it to appreciate 16.28% against a basket of foreign currencies since December 1.

Gold has been another traditional safe-haven throughout history. And yet, due to our usual provincial view of the world, Americans question gold’s traditional role because its price has increased only marginally, to 118.47 for the gold ETF today vs. 117.37 at the close on December 1, 2009. With all the turmoil in Europe and its Euro, why hasn’t gold appreciated if it’s such a safe-haven.

It depends on which currency of the foreign exchange prism you viewed the price of gold. If you lived in Paris or Geneva or Sydney, you probably wouldn’t be asking the question. For example, the price of gold in Euros has appreciated 25.5% since December 1. Gold’s price has also appreciated for those who look at it in terms of Swiss Francs, UK Pounds, Australian Dollars and Japanese Yen (click on image to enlarge):

Because gold is a store of wealth, it’s price fluctuates both in terms of it’s underlying supply/demand relationship and in terms of the exchange value of the specific currency into which you want to convert it, something that’s also true for other commodities like oil, copper or silver.

Gold appears to us to not have appreciated because the $US has increased in value relative to other currencies so much in such short a time. In retrospect, those in Europe who were looking to dispose of their Euros could have been essentially indifferent between converting them into either $US or gold since their prices (in terms of Euros) have moved essentially in tandem. What does it mean for us in the US? So long as the $US is considered as much a safe-haven as the precious metal, it could be difficult to look for gold to appreciate much. But how safe a haven is the US actually?

Again, in our provincialism, we criticize the sovereign debt crises of Greece, Spain and other European countries and recommend courses of action they need to take to fix their problems but don’t look in our own backyards to see the mess we’re in. The US debt represents 24% of the world’s sovereign debt (followed by the U.K. with 16%) and yet only around 2.59% of our debt is back up by of gold ranking us 54th among all countries (while the U.K. ranks 92nd with less than 0.15% of their debt being backed up by gold).

How long before the focus shifts from the Euro as a week currency to the Pound and then the $US? Perhaps the traditional June 30 fiscal year-end for Federal, state and local governments and the debates that will ensue regarding deficits, budget cutting, and defaults will be the trigger sending foreign money to again flee for safety, joined this time by Americans, causing the $US to decline and gold and other commodities to increase.

June 12th, 2009

The Linkage From Oil to Natural Gas to UNG

A number of readers write in with questions or stock recommendations. Natural Gas has become a recurring theme in many of these communications so I figured it was time to dig up some research. One of the most informative sources was Wikinvest (located, by the way, by searching for “oil prices and natural gas prices” on Microsoft’s new search engine, Bing.com). Some facts I learned at the site include:

  • per unit of energy its combustion produces 30% less carbon dioxide than oil, and about 45% less carbon dioxide than coal
  • Natural gas is more abundant [than oil]: at constant levels of production, the worlds proven supply of natural gas will last 65 years, higher than oil’s 41 years.
  • Like oil, however, most supply rests outside US borders (96.7% for natural gas); United States holds only 3% of the worlds proven reserves of natural gas, compared to 28% for for Russia and 40% for the Middle East
  • key drivers of the end-user price of natural gas are two-fold. (1) The raw fuel costs account for about 60% of final costs, while (2) the transmission and distribution costs account for the remaining 40%
  • it is challenging both to transport and to store [natural gas], limiting the short-term flexibility of supply in response to demand shocks.
  • predominant method of transportation in North America is via natural gas pipelines
  • LNG (liquified natural gas, an increasingly popular method of transport) requires major investment in both deep-water, sheltered ports to harbor LNG tankers and in liquefaction and gasification plants on both ends of the transport route. As of December 2008, the U.S. had 8 LNG terminals but plans to nearly double capacity over the next 3-5 years
  • Storage [of gas inventories in low usage months for supply in winter] also offers an opportunity to reduce the cost of natural gas
  • A barrel of oil contains approximately 5.8 million BTU’s of energy, natural gas (priced in terms of 1.0 million BTU’s) should trade at one sixth the price of oil …. In theory, when the oil/gas ratio is above 6, there is an arbitrage opportunity available from purchasing gas [storing it] and selling it when prices revert to the energy equivalence value
  • Natural gas prices historically are correlated with oil prices
  • US fulfills more than 65% of its oil needs from imports, triple that of natural gas, changing the supply/demand fundamentals between the two sources of energy.
  • since excess supply in North America can’t be cheaply shipped to other countries, falling domestic demand has translated into rapidly falling prices.
  • Over the next year, there are enough liquefied natural gas plants set to come online to expand global natural gas demand by 30%
  • From September 2008 to March 2009, the number of natural gas drilling rigs operating in the U.S. fell from 1,606 to 884, because of the contraction in gas prices
  • Natural gas demand observably fluctuates on a seasonal basis, falling in summer months and rising in winter months
  • fears over repeatedly bad hurricane seasons have led to higher prices because of their track record of causing supply disruptions
  • the previously informal association of countries in the GECF- Gas Exporting Countries Forum transitioned to a more formal status by adopting a formal charter and opening offices in Doha, Qatar

All interesting but as an individual investor how do I play these facts? I built a date chain linking oil prices, natural gas prices and the price of UNG, the Natural Gas ETF and most convenient way for investors to monitor and invest in natural gas (click here for spreadsheet).

There have been some interesting divergences in the price of UNG relative to the price of Natural Gas and between Natural Gas and the current price of oil. A history of the link between the price for a barrel of oil and UNG compared to the actual price of UNG since it was first traded in April, 2007 is:

The Financial Time just included an interesting story about growth in the activity in UNG is causing some interesting unanticipated problems entitled “The problem with commodity ETFs” by Izabella Kaminska. According to the story, the huge open position is causing difficulty as the expiration of futures options approach and:

Given this uncertainty we would rather play it from the safe side and reduce the NatGas exposure for the next four days. Furthermore, this will be the first time that the UNG rolls such a position (double the size as a month ago) which means that the managers of the UNG have no practical experience in the rolling of such a large position and of its potential market impact….Causation or correlation with UNG aside, one thing is sure – some very peculiar things have been going on with the price of natural gas since the fund began to inflate. People are beginning to wonder why.

So while the theoretical price of UNG is around 27.50 given the current price of oil, the actual price is between 14 and 15. The large exposure might explain why UNG hasn’t moved up. It’s all very complex and I hope I’ve helped those interested in playing this commodity.

May 22nd, 2009

Is it déjà vu or something new

If you’re anything like me, then your focus is beginning to turn from “what-should-I-buy” to “what-should-I-sell”. Although it was a phenomenal run since March 9, it was just too good to last. Sure, the Index crossed its 180-day moving average (I’ve added the more conventional 200-day moving average to the chart as a gray dotted line for the traditionalists) but it never was with convection. It did so for only a day or two and volume actually declined and continues to do so.

We’re now stuck with the toughest question in stock market investing/trading – when should you sell? Accepting the proposition of a 10% market correct to around 800-810, what should we do with stocks we now own? I wish I could give you an answer but no one answer or rule of thumb covers every situation.

More importantly, the question you should ask yourself is whether there are strong, compelling reasons to not sell a stock. As a general rule, I would say that market direction and momentum rules; if the market is starting to trend down, you should sell nearly everything (especially since the Index is still below the 180-day moving average). Because you think it’s a good company, pays a good dividend, you already own it and believe it will come back or because Cramer just mentioned it on his show are not good enought reasons to continue holding a stock.

Other factors you should consider:

  • Did you buy the stock close to the March 9 bottom and now have a large profit [at least sell half]? Or did you just recently buy the stock and it now has a small loss [no loss in selling and starting again later].
  • Is the stock volatile [will drop 20%, for example, if market drops 10%] or relatively stable [perhaps weather the storm with some]?
  • Contrary to everything a regular reader of this blog believes, are you a buy-and-holder who’s owned the stock since before the crash and are hoping it will return to pre-Crash levels when the market and economy finally recover [you’re a lost soul – Sell]?
  • Do you actively monitor and manage your portfolio [conserve your capital to gain relative to the market when it’s time to jump back in]?
  • Do you have a way of knowing [like, for example, through reading this blog] when it’s time to get back in and what stocks might be the right ones to buy then?

Here’s a strategy I’ll be following myself:

  • I plan to be no more than 30-40% in stocks. If the market declines more than 10% (or, coincidentally, below the now converged 60- and 90-day moving averages), I plan moving again to nearly 100% cash.
  • Holdings will be limited to stocks related to:
    • weak dollar (forex ETFs),
    • commodities (steel, coal, ag products),
    • precious metals (gold, silver and miners),
    • higher interest rates (Treasury bond short ETFs),
    • foreign stocks (Australia, Chinese, Brazil, India, Asian)
  • As a further hedge, I have a small percentage in the S&P double short ETF, SDS.

I know this sounds extremely conservative, some might even call it pessimistic. But I’m actually quite optimistic. I, like many others, have been waiting on the sidelines and are anxious to jump in with both feet. There are reports of huge amounts in money market accounts waiting for just that opportunity. I’ve been anticipating this pullback and have written often about it as you know.

It’s not going to be much longer but the doubts, fears and anxieties will turn the next several weeks into a déjà vu kind of experience.

April 17th, 2009

The Next Industrial Revolution

For all the cynics out there who claim that this is a sucker’s rally, a bear trap and to those skeptics who resist the possibility that bottoming process began last fall and really put on a head of steam on March 9, I only have this to say: “Tell that to the rest of the world”.

They need to get their heads out of the sand and begin accepting that the next phase of economic growth may not come from our spendthrift consumer economy but as a result of the creation and catching up of consumer economies in the rest of the world, especially Asia, South America and, yes, Russia. The economies and the stock market’s in those regions aren’t waiting for our economy to get back on its feet. Those economies and stock markets are already moving beginning to surge ahead (click on chart to enlarge):The index is set to 1.00 and begins January 15, the day Cramer compared the Brazil and China ETFs (see my “Cramer and EWZ, FXI and Other Intermational Markets“. That show helped me focus on the opportunities in markets around the world. While the S&P 500 has increased 2% since January 15, the Russian ETF is up a comparable 49% and China 29%.

While we’re pointing fingers and trying to figure out who to blame for the mess we’re in, those stock markets are forging aheadtrying to figure out which industry group is going to lead us out of our bear market, whether GM will go into Chapter 11, whether commerical property and credit card debts are the final shoes to drop and whether the market will start correcting at 850, 900 or 950 …. while that’s what we’re focused on markets around the world aren’t waiting for us and are forging ahead (European markets aren’t doing much better than ours.)

We often use metaphors when describing challenging situations, so what we’re facing as the world economy resumes its forward momentum might be considered a “World Industrial Revolution“. The first was in Great Britain as factory production began to displace independent trades people. The second was in the US and Europe when technological and economic progress gained momentum with the development of steam-powered ships, railways, and later in the 19th century with the internal combustion engine and electrical power generation. The Internet Age might be considered a sort of Industrial Revolution. The next could be the industrialization and “consumerization” of the rest of the world.

It’s something that we’ve envisioned for a long time, something taught in business schools for years (e.g., International Trade) but has mostly been considered the sourcing of goods and services for American consumers from abroad. This coming Industrial Revolution will be about the rest of the world gaining closing the gap.

We’re going to hear a lot more again about resource shortages, escalating commodity prices and booming international stock markets. If you don’t feel comfortable buying foreign ADR’s, you can participate through the foreign market ETFs.

February 12th, 2009

Index and Stock (FCX) Reversal Patterns Are Building

The riders on that roller coaster to the right is exactly how I felt watching today’s market. Of course, we all have probably heard that, according to CNBC, the Obama Administration announced

“it’s hammering out a program to subsidize mortgages in a new front to fight the credit crisis, sources familiar with the plan told Reuters Thursday, firing financial markets.”

It’s the “firing financial markets” that I want to focus on. At about 2:45, I wrote on Twitter “Will 3:00 hour be recovery or implosion? For those who buy at bottom of range now’s the time to jump in; rest of us can only tremble.” A few minutes later I wrote: “We might as well not turn computer on until 3:00 – that’s when everything happens and lays ground work for next day. Buyers came in.”

The rest is history because the S&P went from being down 3.1% to slightly above break even in less than an hour (remember the days, long ago, we considered full-year returns not much more than today’s intra-day move as a smidge below average). I give much more importance to today’s move than the average you’ll hear from the “talking heads” because the down leg came so close to breaking below support.

The technicals for an upside move are actually getting stronger day by day. Each day like today brings us closer to the time when we can jump in with both feet and pick up some of those bargains we see all around us. The market appears to be approaching a critical point of convergence:

  • The Index rests on a support trendline extending from 2002 Tech Bubble Crash Bottom
  • Potential reversal in the form of a symmetrical triangle (hopefully, a wish since it could also evolved into a descending triangle)
  • The 60-day MA is flattening and probably will soon cross above the 90-day MA
  • The Index has touched or crossed above the 60-day moving average 3 times recently and may again soon
  • If a cross over the 60-day is successful, a cross of the 90-day may come soon after
  • The On-Balance-Volume Indicator has generated a favorable divergence as the OBV moved up while the Index moved down

Take a look at the chart:

Confirming this rather positive view of the market are all nice basing patterns I’m beginning to find in many stocks today. Freeport McMoran (FCX) is one of many examples I could have picked (for full disclosure, I own the stock):

Notice the similarities between FCX and the S&P 500 Index above. The stock appears to be forming an ascending triangle which is clearly a reversal pattern. The stock’s 60-day moving averages is also close to crossing above its 90-day moving average. The price has already crossed above both those moving averages. However, if the market turns negative, this pattern may fail and morph into a double-bottom (or some other pattern).

February 10th, 2009

US Steel (X): Through the Eyes of the Beholders

If you rely on charts to help make trading decisions by identifying trends, acceptable buy points or required selling levels then you must be flexible enough to accept fallibility. What makes it difficult is that it’s not the charts’ fallibility, it’s your own. Even though charts record a history of trades as fact, they are a blank slate as far as what those trades might portend for the future. That’s the realm of the “stock chartist”.But interpretation is subjective – subjectivity at a point in time and over time.

Two people can look at the same “blank slate” and see it two different interpretations. And those same two people can look at their interpretations and, after some time has passed, make two different interpretations. Does it detract from the process? Does it make charting invalid? Or does it just mean that one needs to be flexible enough to alter evaluations as new information becomes available just as one would had they been working with more traditional, fundamental data (latest quarter’s earnings report or yesterday’s new Treasury financial system bail out plan).

The answer is all in the eye of the beholder. Look at X (US Steel) to see what you would do. First, here’s a look at the “blank slate”:

Interesting, but without context, signposts or guidelines the chart is almost meaningless. Is the the stock continuing to decline at a faster or slower rate? To show that, we’ll add moving averages:

That’s a little more interesting. The moving averages confirm that the rate of the stock’s decline is abaiting. the 90-day moving average has started to flatten out and, if the price merely stays around the current level, it will cross above the slower 90-day moving average merely by the latter’s continued decline. But it, too, will start flattening if the weight of further declines in the price doesn’t drag it lower.

Next, we want to know the extrapolate from past experience what might be the stocks near-term “reflective boundary” (trendline), the price levels where the stock has failed to change direction. This is important because if the boundary (trend) is penetrated, there’s a strong possibility that there’s sufficient momentum to reverse direction in the short-run. The “herd” may have begun stampeding after the stock so purchasing the stock entails less risk.

But this is where the analysis truly becomes subjective, less risky only in the eyes of the beholder. I described the differences between trendlines and moving averages on August 7, 2008 when I described a trendline as “A trendline, on the other hand is the extrapolation of a vector of where hypothetical past and future potential pivot points.” But drawing trendlines is an subjective, more and art than a science. And this is where humility comes in.

There are several chart patterns that could be drawn on the X chart above (arranged chronologically). One chart pattern is a symmetrical triangle indicating a struggle between equally powerful buyers and sellers:

As a few trading days pass, one could insert different trendlines resulting in a rising wedge, usually considered a consolidation (indicating a continuation of the decline as the price breaks through the bottom trendline) rather bottom reversal pattern:

Finally (more correctly, until more trading days pass by), a ascending triangle indicating a high probability of the stock breaking above the upper boundary trendline and a solid reversal:

All this means is that there isn’t any “correct answer”, only the best answer consistent with the bias of the analyst. If you’re bearish on the market, you’ll believe you see a rising wedge; if you’re bullish, you’ll see a triangle. I’ll just wait to see if these patterns are confirmed by the moving averages, by the health of the overall market and by either the stock breaking above/below either the upper or lower trendline (i.e., reflective boundary).

February 8th, 2009

More Stocks with Basing Chart Patterns

Our guests left this morning and I’m all yours again. Don’t take this personally, it was really good to get away from trying to come up with something new to write about each day plus, generally, putting some distance between me and the minute-by-minute, hour-by-hour gyrations of the market.

But there’s another reason it was good to get away. Had I been watching the market as intently as I usually do, I might have either pulled the trigger and loaded up more on stocks as I saw some confidence returning or, listening to all the negative talk about how really, really bad the economy is and how frustrating Congress is for us, the average, lowly taxpayers for whom they work I might have sold on the market’s recent strength.

But I didn’t and am now thankfully looking forward to another exciting week. As I prepare for the upcoming week, I’m surprised by the large number of stocks that have made or are in the process of making bases.

Interestingly, many are in the Industry Groups that were the leaders last year before the $US tanked starting in July. They include the fertilizers, precious metals, steel, metal ores, and agricultural products. Many have crossed above their 90- and 180-day Moving Averages. Here are some of the more notable (click on symbol for charts):

I could have include many, many more (would you believe 100? what about 50?) but you get the picture. As show with the charts I included in last week’s “The Great Walls of Reversal or Consolidation“, the markets are teetering on a wall between consolidation and reversal. It appears that the same is happening in many individual stocks (like the one’s listed above).

Anyone who claims unequivocally that this stock or that has formed a rising wedge or cup-and-handle or inverse head-and-shoulder or falling wedge or whatever pattern …. well just don’t believe them. Their just mimicking the market, either ahead of or following. Add the above stocks to the pharma and healthcare stocks I focused on in my last post.