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II Insight

September 2012

Dear Insight readers
 
With the summer now behind us, we thought it would be a good time to resume our free Insight service.
 
This summer proved to be a roller coaster with a slide in May, down to a low in June. There a base was built and with our indicators oversold we did a lot of buying across our U.S. portfolios. The rally then kicked off and we still hold many of those positions today. The big question now is, will these upside breakouts hold? We shall attempt to answer that conundrum below.
 
Tarquin Coe
 
Technical Analyst, Investors Intelligence, New York office

 

The past month has seen the S&P 500 consolidate just under the 2012 April high. We liked the pause as it allowed indicators to settle back and regroup. That action is healthy and provides a recharge ahead of the next leg up. That leg up looks to have ignited with the September 5th surge, a move which saw the index add 2%. The index broke out to a new 2012 high but the question is will the breakout hold? That is where indicators come in.
At the start of September our proprietary short-term-composite indicator unwound to 30% thanks to the late August consolidation. With that indicator now at a shade over 55%, overbought conditions are still some way off and that bodes well for the S&P 500 extending higher in the weeks ahead.
 
An upside level achievable in the very near-term is 1440.24 (the May 2008 peak). Beyond that, the 2007 and all-time high of 1576.09, is the next big level to pencil in. That all-time high may be tested over the next twelve months, though of course this possibility would need constant reviews as
conditions change.
 
Indicators and indexes are reviewed every day in the US Daily Hotlines.
As mentioned in the opening comment, we did a lot of buying during the June rout. That is very apparent in the Coe Report Portfolio, with the bulk of buying in June. As the rally confirmed our bullish market view, we added further longs, resulting in a now invested position of 175%. We are rarely so aggressive but we felt the risk-to-reward ratio was very favorable at the June bottom.
 
We have not closed out a position since August 6tfh (a profitable short in Avon Products) so the plan now is to ratchet up stops and lock-in gains. We started that process on Monday of this week.
 
A monthly subscription to the Coe Report is available for just $40 a month. With indexes at a make or break point now is possibly the perfect time to take out a monthly subscription and give the service a trial and benefit from our expert advice.
 

Date

Stock

Code

Type

Open Price

Current Price

% P&L

Target

Stop

Alloc %

Comment

3 Feb 2012

Newmont Mining Corp

NEM

Long

60.755

51.69

-14.92%

72.42

42.80

5

Stop type - EOD3

4 May 2012

SPDR Gold Trust

GLD

Long

159.62

168.44

+5.53%

190

161.80

10

Stop Type - ITD

18 May 2012

Royal Gold Inc

RGLD

Long

63.26

90.42

+42.93%

85

80.50

5

Stop type - ITD

21 May 2012

Reynolds American Inc

RAI

Long

41

44.46

+8.44%

45

43.75

5

Stop type - ITD

1 Jun 2012

Lorillard Inc

LO

Long

120.125

123.64

+2.93%

140

115

5

Stop type - EOD3

1 Jun 2012

Dynex Capital Inc

DX

Long

9.23

10.7

+15.93%

10

10.10

5

Stop type - ITD

4 Jun 2012

Randgold Resources Ltd.

GOLD

Long

86.80

111.47

+28.42%

120.73

101.85

5

Stop type - ITD

6 Jun 2012

Market Vectors-Gold Miners

GDX

Long

47.36

50.46

+6.55%

55

48.60

10

Stop type - ITD

8 Jun 2012

Illinois Tool Works Inc

ITW

Long

55.87

60.6

+8.47%

60

56.50

5

Stop type - ITD

8 Jun 2012

Eastman Chemical Co

EMN

Long

47.38

57.37

+21.08%

60

51.70

5

Stop type - ITD

11 Jun 2012

Kellogg Co

K

Long

48.63

50.39

+3.62%

57.70

49.63

5

Stop type - ITD

13 Jun 2012

JPMorgan Chase & Co

JPM

Long

34.93

39.3

+12.51%

40

36.60

10

Stop type - ITD

13 Jun 2012

Mattel Inc

MAT

Long

32.12

35.5

+10.52%

40

34.25

5

Stop type - ITD

15 Jun 2012

Nike Inc

NKE

Long

100.96

99.29

-1.65%

114.81

87.5

5

Stop type - EOD3

15 Jun 2012

ConocoPhillips

COP

Long

54.96

56.64

+3.06%

75

50

5

Stop type - EOD3

18 Jun 2012

Apple

AAPL

Long

585.97

680.44

+16.12%

644

610

7.5

Stop type - ITD

20 Jun 2012

ISHS Russell 2000 Index

IWM

Long

78.75

84.26

+7.00%

84.66

81.05

15

Stop type - ITD

20 Jun 2012

Intrepid Potash

IPI

Long

21.02

24.1

+14.65%

35

22.60

5

Stop type - ITD

27 Jun 2012

SPDR Sector Trst Consumer Discretionary

XLY

Long

43.161

46.78

+8.38%

48

45.10

10

Stop type - ITD

27 Jun 2012

SPDR Sector Trst Energy

XLE

Long

63.81

73.45

+15.11%

70.50

71.20

10

Stop type - ITD

18 Jul 2012

Williams Cos.

WMB

Long

30.70

33.89

+10.39%

35

31.60

5

Stop type - ITD

25 Jul 2012

AT&T Inc

T

Long

35.47

37.3

+5.16%

40

33.50

5

Stop type - EOD3

27 Jul 2012

Exterran Holdings Inc

EXH

Long

14.57

19.42

+33.29%

22

17.50

2.5

Stop type - ITD

13 Aug 2012

Smithfield Foods Inc

SFD

Long

19.19

20.38

+6.20%

22

17.91

2.5

Stop type - EOD

16 Aug 2012

Baytex Energy Trust

BTE

Long

46.22

48.21

+4.31%

50

39.75

5

Stop type - EOD

24 Aug 2012

Altria Group Inc

MO

Long

33.93

34.27

+1.00%

40

33

5

Stop type - EOD3

31 Aug 2012

Arm Holdings Plc

ARMH

Long

27.21

26.23

-3.60%

32.18

24.90

2.5

Stop type - EOD3

5 Sep 2012

Verizon Communications Inc

VZ

Long

43.87

43.72

-0.34%

50

42

5

Stop type - EOD3

7 Sep 2012

Belden Inc

BDC

Long

37.87

38

+0.34%

60

33.80

5

Stop type - EOD3

Closing prices as of 09/07/2012

Our ETF Review portfolio has been ticking along nicely this year. We held many positions during the recent rout, picking up dividend payments along the way. Some ETF areas have been resilient to the market volatility and we have been highlighting those on a regular basis.
 
Once such example is the iShares Biotechnology Index (IBB), which we bought on December 1st last year at $102.41. Though the yield is barely 1%, the fund is defensive and has also proved to be a decent momentum play, generating a profit so far of +37.5%. We still like the fund and would suggest buying on any weakness. If owned, a stop-loss could be placed just beneath $125 as a move to there would put the twelve month uptrend under threat.
 
The ETF Review is published on a weekly basis with trading ideas from all areas of the ETF world, both on the long and short side.
 
Website technical feature – the MA crossover
There are many useful tools and features availaible to our subscribers. Given that a rally is underway in the equity markets we thought it would be a good time to illustrate the “MA Crossover” page which is under the “signals” tab. These lists, we have one for each geographical region, are created at the end of the trading day and detail all the golden-crosses (bullish) and dead-crosses (bearish). The signal is simply the 50-day exponential moving average (EMA) rising through the 200-day EMA to print a golden-cross and a dead-cross is where the 50-day EMA crosses down through the 200-day EMA.
 
Golden-cross signals often prove reliable in the early stages of a general market rally, such as what we may be experiencing now. Last week we used some of these bullish cross-overs to produce trading ideas in our daily reports.
 
Belden (BDC) was one such example. The computer network cable maker has printed three other golden-crosses since the 2009 bottom and each instance has seen a subsequent rally of at least several weeks in duration. The golden-cross coincided with a turn up on the relative chart versus the S&P 500, resuming the long-term trend of outperformance, adding further bullish technical evidence to the picture. We recommended buying the stock and are targeting a move to $60, the 2007 and all-time high.
 
Subcribers to our US Daily Hotline service have access to the MA crossover feature along with many other technical tools.
 
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This report has been produced and compiled by Investors Intelligence, a division of Chartcraft Inc, and is provided for information purposes only. Under no circumstances is it to be used or considered as an offer to sell, or a solicitation of any offer to buy. While all reasonable care has been taken to ensure that the information contained herein is not untrue or misleading at the time of publication, we make no representation as to its accuracy or completeness and it should not be relied upon as such. From time to time Chartcraft and any of its officers or employees may, to the extent permitted by law, have a position or otherwise be interested in any transactions, in any investments (including derivatives) directly or indirectly the subject of this report. Also Chartcraft may from time to time perform other services (including acting as adviser or manager) for any company mentioned in this report. The value of securities can go down as well as up, and you may not get back the full amount you originally invested. Derivatives in particular are high risk, high reward investment instruments and an investor may lose some or all of his/her original investment. If you make an investment in securities that are denominated in a currency other than that of US dollars you are warned that changes in rates of foreign exchange may have an adverse effect on the value, price or income of the investment. The investments referred to herein may not be suitable investments for all persons accessing these pages. You should carefully consider whether all or any of these are suitable investments for you and if in any doubt consult an independent adviser. This report is prepared solely for the information of clients of Chartcraft who are expected to make their own investment decisions without reliance on this report. Neither Chartcraft nor any officer of Chartcraft accepts any liability whatsoever for any direct and consequential loss arising from use of this report or its contents

US Sentiment holds the key
The Advisors Sentiment Survey continues to provide advance warning of major market turning points.  
The analysis and data regularly feature in the international financial press as a key indicator of market reversion.
Examples of these articles can be found on Barrons, NY Times, and Investor's Business Daily.
Read what CNBC said about the biggest switch in sentiment for 7 years.
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Historic Advisors’ Sentiment data since 1963 is also available; please contact us for further details.

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