Category Archives: Stock market

Transportation Stocks are Outperforming the DOW

Timing can improve your investment results and Charles Dow knew that better than anyone else 100 years ago. Some say that timing is everything, but it isn`t. Timing is interpretation. To watch the swings of the stock market are more important than ever for protecting your hard-earned investments.

Some investors are negative and some are positive. Positive investors say that the economy is good, but how do we know that? The strong rally lately is being led higher by economically sensitive groups like transports. I like to watch the Dow Jones Transportation Average Index (DJTA), which is closely watched to confirm the state of the U.S economy.

Chart

As you can see from the chart above, the transports take what the industrials make, and that simply confirm the trend of the Dow Jones Industrial Average (DJIA). DJIA will follow DJTA. In other words; if the DJTA is declining while the DOW is climbing, it may signal economic weakness ahead.

What you see in the transportation industry affects almost all other industries covered in the DJI. Wal-Mart and Home Depot (on the DJI) rely on transportation shipments to stock their stores. Also Coca-Cola, IBM and Caterpillar use transportation. Transportation providers can bid for higher contract prices, making their own outlook more positive and causing the DJT to rally. At the same time, the anticipated outlook of the transportation industry`s customers is reflected in its stock prices and the performance of the DJI follows DJT.

It may be a divergence in the two indices and if you see that signal, you know that the demand for transport is falling, which means the nationwide demand for goods is declining too. A bad sign. It didn`t look good at the beginning of September this year, but it turned up again 15 days later.

Airlines and railroads outperform the broader market and continue to expand revenue. In the last five days, the transportation stocks are up 6,24%, while S&P 500 is up only the half. Transportation stocks will continue to move higher as the energy price remain low. Dow Jones Transportation Average is up +15,18% YTD.

The best performer on the list so far in 2014 is Delta Air lines (DAL), which is up +41,57% YTD, followd by Alaska Air Group (ALK), up 37,14%. Avis Budget Group (CAR) is up +31,10% YTD, while FedEx Corp (FDX) is up only +13,40% YTD.

The economy continue to improve and a good indicator is, among others, the strong third-quarter earnings from Caterpillar yesterday. Caterpillar reported better than expected results in the third quarter and lifted its profits outlook for the year to $6,50 a share, up 5,5%.

Some popular ETF funds is iShares Dow Jones Transportation Average Fund (IYT), which represents the most popular way to track the transport sector. The fund manager have invested in a small basket of 21 securities, and this fund is heavily exposed to the railroad industry.

SPDR S&P Transportation ETF (XTN) is another one, with 39 securities in the basket. This fund is heavily exposed to trucking and airlines. The fund has been a good performer since they started the rally in November 2012.

Guggenheim Shipping ETF (SEA) is the worst performing ETF on the list. The fund tracks 27 shipping company stocks with high degree of risk.

If you want to check where the economy and the DJI stands, make sure to check the DJT as well. If the DJI is up while the DJT is down, you know that something is wrong, but right now, DJT is up about 16% YTD, while DJI is up about 1% YTD.

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

 

 

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Fear Index plunged

Wow, what a rally in Japan, up 579 points to 15,111, which is up +3,98%. Gold and Silver is also up, but they are moving like turtles. Up 0,57% and 0,72%. Crude oil (brent) is down -0,28%, trading at 85,92. It will continue to be big opportunities for day traders now, as the market will still move up and down.

Vix 20.10.2014

(Picture: Fear Index)

The appetite for volatility is bad for the Fed, and it didn`t take long for them to respond to last week`s market turbulence. A representative for the Fed said last week that the Fed could slow its retreat from a highly accommodating monetary policy, and this is something investors like to hear.

There were some rumors last week that the Fed could embark on QE4 to support asset prices. Not only investors are nervous at times like this. Also Fed are. So, what can we expect the coming days and weeks in the market?

We need to look at charts and data. The S&P 500`s 200 MA price is 1,906, and the stock market was trading below that technical level. That level was a floor during the selloff since November 2012, and the average price of the S&P 500 is a good indicator to be bullish on.

This is not the first time that have happened, and we have seen this many times. The mentality now is «buy the dip», as there is pretty good U.S fundamentals out there, which is making investors interested in buying again.

The fear index plunged -12,74% on friday, and the gap in the curve in the Vix futures, gave investors optimism. If we compare the cost of the options that protect against losses in shares in November versus those timed to expire in 90 days, you can predict the future. On friday, selling dropped down 3% on October 15, while near term options skyrocket 25% above those timed to January, and this is the most in three years.

We are close to the end of the sell-off in the equity market, as the bottom has been seen and this is historically a time for bottom fishing. It has happened six times when Vix has surged above its own futures like we saw the last week. The inverted curves is historically a sign that investors think the spike is coming to an end.

I`m exited about Apple Inc later today after the closing bell. Are they able to beat the Wall Street? It`s estimated that Apple Inc will report revenue of $39,8 billion ($37,5 last year) and earnings of $1,31 per share ($1,18 last year).

iPhone sales is what people will look for, and it`s estimated to see that Apple may have sold about 38 million iPhones. A strong dollar can help them a lot to beat the revenue estimate, but what about Apple Pay? Is it gonna be launched today?

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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Earnings focus

Investors are waiting for earnings this week and today big earnings announcements are coming from Bank of America, BlackRock, American Express, eBay and Netflix. They will all report after the close later today.

What`s happening in the market is a change. Investors move from one sector to another. Investors are not buying everything like last year any more. Take a look at Best Buy. Tripled in 2013, but plunged over 40% at the beginning of 2014. The stock in down 62% from the top, and struggle to bounce back. Stay away from stocks like that.

I see a new bull market starting right now. That`s why it is very important to jump in now, because it will probably be too late at the end of the year.

Jump out of stock without rock-solid fundamentals and buy high-quality stocks with solid fundamentals. Like that, the money will just rotate. The new bull stocks will not be hammered as hard as the crock stocks. They will rather take off right now.

Money will always be on the move and will always flow towards its best and safest returns. Take a look at the dollar. It`s going straight up. At the same time, the fear have doubled. Other quality blue-chip stocks will report later this week. Stocks are plummeting today. Is it emotions or fundamentals?

I`m very excited about the rest of the year and the beginning of 2015. New bull markets starts right now.

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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Airlines hammered

Many investors are scared right now as it is time for Halloween soon, but Halloween is not the reason. It`s something worse; the stock market.  S&P 500 and Nasdaq had their worst weeks since May 2012, but I don`t think it is a big surprise for someone in the market as this is highly expected.

AA

Russel 2000 is in a correction territory and DJIA has dropped down about 200 points in four days in a row, and that has not happened in years. Last time we saw volatility like this was in 2011. Equities are a scary thing for investors right now, and that is not because of the coming Halloween.

S&P 500 ended at around the 200 MA and that will be a very important level to watch for in the coming days/weeks. SPX declined 3,1% last week and are now trading 5,6% below its peak of 2019,26 a month ago.

Many sectors are starting to be oversold and this is a good opportunity for many to pick up stocks. Take a look at the oil price, which is declining every day now, trading below $90. The surplus for many in this oil sector is good, so they don`t complain with a price below $90, despite an break-even at $92.

Other sectors will benefit from the declining oil price. American Airlines will benefit from reduced fuel costs and the stock looks cheap. Fuel is the largest expense line for American Airlines and a decline in oil prices will have a huge impact to their bottom line.

On December last year, AMR Corp merged with U.S Airways. They are now the world`s largest airline; American Airlines Group (AAL). The shares doubled since they merged, but the stock have had a pullback which makes it interesting for investors as the fuel cost are making it more profitable.

AAL has delivered great results, have good cash flow levels and their revenue are increasing. They have high-capacity and a strong pricing power, and are expanding its network to China. Those routes is one of the most profitable routes worldwide and they will start to compete with Chinese airlines.

With around $10 billion in cash and possible buyback program, the earnings per share will increase to new highs. The forecast for earnings is $5,21 per share, and with a buyback program, this stock looks undervalued, and EPS would strengthen.

The stock slid -7,15% yesterday and looks cheaper and cheaper every day. Another airline stock to decline was United Continental Airlines (UAL), down 7,29% yesterday. The market trend indicator gave us a bearish reading on stocks and that`s for the first time in some time. If we fall below 1,800 on the S&P 500, the war will be over and the bears are the winners. What  investors are doing now, is jumping from one sector to another.

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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Rock`n Roll in the stock market. Fundamentals or Emotions?

Are stock markets falling because of the fundamentals or investors emotions? The one that is first to sell stocks is the small investors. You can see that if you look at the small cap index like Russel 2000. They started the downturn long time before S&P, Dow and Nasdaq.

SPX 13 October 2014

(Picture: S&P 500 Index)

The big ones are selling later, if they are selling at all? Big investors like Buffet and Icahn are holding their positions and pick up the stocks when it drops down. So are the big hedgefunds. This is simply because they have money, time and look at the fundamentals.

Apple Inc is now trading at around $100, and Icahn said last week that the stock is worth about $200. Of course he is not selling stocks. As an activist investor, Icahn have written a letter to Apple`s CEO Tim Cook.

Icahn told him to go for buybacks. Apple will launch their new Apple Pay in a few days, and that`s probably why Icahn is so positive on that stock right now. The big player will win, and the small one with bad nerves will lose, because the small one don`t know when to jump in again.

I think that many investors don`t understand the Apple hype, but I will not be surprised it Apple beats the 51,03M bar Apple have set for itself this year. The holiday season will take the level higher.

The Dow suffered last week and Nasdaq were particularly hard hit, down 2,33% on friday. The fear Index tells us that investors are terrified at the moment. Investors didn`t like the new data from Germany and Japan, and don`t know what to do about Fed`s plans to end its stimulus and their low-interest rate policies. This is why the market is volatile right now.

Big players are looking at the fundamentals. I think they will look for the biggest companies in the U.S, and third quarter earnings reports will come from Netflix and eBay on Wednesday. Google will come with their report on thursday. In addition; Chrysler will make its debut on the New York Stock Exchange.

It is when the big players start to sell that the stock market crash, and they are not selling right now. They are waiting. Swiss adviser Marc Faber has talked about a crash for over a year now. He says that we are in a gigantic financial asset bubble. Anyway; your strategy shouldn`t be to buy on top and sell at the bottom, so be cautious.

Right now, it`s all in a green territory in Europe. Buffet is buying stocks this week, and JP Morgan is bullish and say they don`t expect the market to drop down 10%. Trade what you see, not what you think. The market is volatile and will continue to be so for a while.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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