Clearly, this past week fed’s comment paint the headlines and explain the upside moves. Especially strength in emerging markets which stood out (MSCI Emerging Markets 116.62 +5.14%). Coinciding with strength in emerging markets, commodities were the top performing leaders during the week. Notably, commodity related steel and energy showed strength. (more energy below).
Investors beating to the same beat:
Put/Call ratio coming down along with volatility (VIX) – this suggests that we are back to compliancy. Therefore my goal this week is to think ahead and avoid “compliancy” risk.
Not seeking value in Housing:
Quick Note:
Fed view on housing: “Recent indicators have been mixed and the adjustment in the housing sector is ongoing.”
Important to note that the Federal Reserve has recognized recent signs of weakness in housing. Although, let us not forget homebuilder Index peaked in 2005 therefore sub prime is the follow up to weakness in the financial sector.
Next vulnerable area in financials looks like REIT’s and keeping a close watch. In Financials looking to rotate into banks. For example, shorting ICE a rewarding call from weeks ago. Few short covering in lending space resulted in upside move but rather sell that news. Again, in the near-term looking for little upside move but looking to stay neutral or short stock specific names.
Energy stocks showing strength after a rough open to the year. Notably, in the last three months energy has led the broader market. In the near-term, looking for consolidation. Technical’s setting up positively, and maintain my neutral view in the overall sector but undeniable strength emerging.
Crude: Following an 8+ month correction from summer 2006 highs, tight range in the $58-62 range. News flows this week critical to move prices as key resistance at $62.
MOT – Despite weak numbers and poor performance stock is worth a look at these levels. First, analysts were expecting bad numbers and weak sales. Of course, below expectation is the headline observation Stock is down from $26 -17 range, with bad news factored in and with surfacing rumors on PALM buy out. Therefore, add to the watch list name for an attractive entry point. Sticking to the discipline, outside of the headline risk look for stabilization at current levels.
Tech Favorites to watch: HTCH, ELX, BRCD,NTGR, and FFIV.
Media: looking for pullbacks in the near-term w/ PBS ETF stretched. Similarly, food related stocks are overdone as well. That tells me that defensive themes are overplayed here and chasing beta in the right sector might be rewarding. (ex. Broad market risk).
Stock specific story: SSCC: The homebuilders and housing related stocks are not my favorite place to seek value plays. But I do like lagging names in home furnishing. There are few attractive consumer ideas which are not streched. Also, analyst ratings are too negative in this name with positive growth potential.
Group Review:
Powershares Clean Energy ETF looks attractive at current levels given its consolidation. Specific names to consider. BLDP- shares a similar pattern with $5.50 support and attempting to stabilize at current levels. A risky bet given negative earnings and showcased by analysts’ estimates with one buy rating. Similarly, strength in the sector among some names like ZOLT and AMSC developing high-tech ways to upgrade the nation's strained power grid.. Momentum name in the group ELON – looks very strong less timely. EMKR- looking for upside catalyst, CPST- deeply oversold FCEL- 5.84 support.
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