CHART-NADO (SECTOR MODEL RECAP)

Several key things have been in play for months and I believe they will continue to be the leaders in this environment.  We'll update a few familiar charts, but also make sure to highlight the themes that will be the beneficiaries of the same sector rotation model we've based our analysis on for several years.

Let's dive in.

In my estimation we are now in the left middle 1/3 of this graph in that we have witnessed this crazy 4 year rally in stock markets, but just to throw a wrinkle at you, we have kind of limped along in the economic recovery marked with massive repression of interest rates causing some delayed impact within the normal rotation.

My thought is still that Technology, Industrials, Basic Industry, and even Energy are the key winners now and in the short to medium term.  However because of distortions related to interest rates, finance too will benefit from net interest margin spread growth, and they should continue to benefit.  (I'll hedge my bets here and suggest that regional banks and insurance companies will win, while large money center banks may lose as they are heavily dependent on mortgage activity for some of the success.)

I'll just post the charts with little comment.

COP

KMF

XLE

 MRK

PFE

IXN

SOCL

PNC

FITB

XLF

FCX

CAT

XLI

EWC

EEM:SPX

EEM

Emerging markets seemed to have bottomed relative to the SPX and may be the area to watch in terms of "better than" performance.  

SUMMARY

We've had a correction and despite all of the crazy geo-political issues, there are simply strong looking charts and reasons to watch for a good bounce.  Technology, Financials (especially regionals), Industrials, and yes, even cyclicals and emerging markets are the place to invest.  Many of the charts are at support so further weakness would take a prudent investor out of their positions.  This is a good time to re-evaluate all positions, commit to firm stops, or widen them out if you are willing to handle a bit more volatility to ensure you maintain positions.

WILD CARDS AND GEOPOLITICS

The wild card in the context of investing right now is determining a winning strategy in the midst of amateur hour at the White House.  The President is way over his head in the foreign policy arena and his adversaries (foreign and domestic political and national rivals) are circling like sharks.  His mis-steps related to Syria are serious and his weakness here has emboldened challenges from Assad, Iran, Russia, and China.  The correct thing to do for the President now is to simply state we don't know who used chemical weapons and then suggest that we'll wait for more evidence.  Meanwhile he should continue to arm and support the terrorist rebels and engage Assad to the point in which they begin to win.  At that time, our strategy should be to withdraw arms and support till they are weakened.  This approach assures no winner arises and continues to draw the evil black eyes of Iran, China, and Russia to this little spot of dirt in the Middle East. 

Our President must learn that there is no winning in winning and there is no losing if you support and are friends with the meanest and worst strong man as long as he wins and you are committed to giving him indefinite monetary support forever (where are you Mubarak, Obama didn't mean it!).  We've had our Utopian experiments by both Bushes and President Obama.  Clearly the people in this region do not have the same value system and cannot appreciate the same type of democratic approach our country actually used a long time ago.  In addition, we cannot pick winners and losers in the region as most of the time the new guy is a lot worse than the old guy.  

My point here is simply that Obama probably won't take my sage advice and I'm sure his arrogance will be more of a guide in his approach to use a "sterile" volley of tomahawk missiles to soothe his wounded pride.  An attack will result in increased oil and gas prices, refiner losses, gold and silver gains, and an uncontrollable situation.  Keep an eye on it!

GOATMUG

Goatmug is an investor that cares about you and your family. Goatmug's Blog - Financial Perspectives From The Mountain Top is a collection of thoughts on our economy and how it impacts the lives of investors and average people. While several specific investments are named in many of his posts, these articles are simply invitations for you to do your own research and reference to these securities does not constitute financial advice. Your situation is complex and unique and you should seek professional assistance with your trading and investing. Please visit Goatmug and share your comments at http://www.goatmug.com/

ENERGY CHART ROUNDUP

I wanted to post copies of many of the charts I examine on a daily basis.  I found that there are just too many to post in one entry, so I'll blast them all out over the course of the next couple of days.  We'll look at other cyclical names, dividend payers, banks, and health insurers.  Simply drop by goatmug.com later this weekend.  We'll start with energy as it has been quite interesting of late.  If inflation and global growth is muted, why do we still have $105 oil?  Let's jump in.

XLE

Recent weakness is displayed in the last week, but up, up and away seems to be the overall trend.  The overhead resistance level is at $84.50, but this certainly could continue with this week's negative direction and go lower to the high $70's.

$NAT GAS

If $3.25 doesn't hold, it is bombs away to $2.75

$WTIC

There's a bunch going on in this chart, but if oil gets above $107 area, we could be talking about $150's.  We'll need some type of event in the Middle East.....lucky for us, the Middle East is calm and there are never any situations that boil over and cause tensions that impact the rest of the world.

UGA

Gas looks weak and supply data suggests that UGA will go lower.


COP

Um, just fantastic.  With nice gains on the books and nat gas looking weak there might be a reason to sell with overall market weakness.  The aim would simply to reload and buy more on a pullback in the $58 area.


PSX

The COP-cousin just doesn't have the same mo-jo as it's close relative.  Higher oil prices and lower gasoline prices will hurt this guy and this is why the stock looks poor.


OXY

This has been one of my favorite charts to watch over the last 4 or 5 years.  Weakness here is seen in the chart and we could see a pretty significant plunge to the high 70's or lower.


APA

Short.  I've hated this one for a long time, it seems like it won't be long till it rejoins its old channel much lower.

KMF

This is a MLP type investment closed end fund.  It is still within its upward channel and we may have an opportunity to see it test the lower limit.  If it bounces, buy.


CHK

Despite my many posts citing my dislike for CHK, the shedding of Aubrey McClendon seems to have been a very good thing for the stock.


SRV

My guess is that you'd call this a diamond pattern if I drew it correctly.  I'd have to guess that it ends up to $8.80.  This is another version of a closed-end fund for MLPs, but is more leveraged and has a poorer management from what I can tell.

Oil and gas have often times adhered to the sell in May and go away saying.  That would not have served you well here in the energy sector this year, but could August be the time to get out of dodge?  I believe we'll see lower prices in the equities and perhaps oil my go higher if the Middle East tensions do not abate.

GOATMUG

Goatmug is an investor that cares about you and your family. Goatmug's Blog - Financial Perspectives From The Mountain Top is a collection of thoughts on our economy and how it impacts the lives of investors and average people. While several specific investments are named in many of his posts, these articles are simply invitations for you to do your own research and reference to these securities does not constitute financial advice. Your situation is complex and unique and you should seek professional assistance with your trading and investing. Please visit Goatmug and share your comments at http://www.goatmug.com/