Friday, July 15, 2016

Watch the Bellwethers:

A year ago many market bellwethers had broken down below long term moving averages. The term Bellwether – was derived from the Middle English Bellwether which refers to the practice of placing a bell around the neck of a castrated ram – (a wether) in order that this animal might lead its flock of sheep.

Some improved market bellwethers are Goldman Sacs (financial), Disney & AutoNation (Consumer), Gilead (Health Care), FedEx (transports), Boeing & Caterpillar (industrial) and Apple (technology)

The Goldman Sachs Group Inc (GS) is a component of the Financial Select Sector SPDR ETF (XLF). Goldman leads most bull and bear market cycles having peaked in October 2007 and bottoming in November 2008. Goldman has completed a short 2015 bear phase and should lead the XLF higher through 2016 + thanks to for the point & figure

Wednesday, July 6, 2016

More on the Guns or Butter question:

Paul Anthony Samuelson was an American economist and the first American to win the Nobel Memorial Prize in Economic Sciences. His textbook Economics (ISBN- 0-07-0 092863-0) has become a classic in which he states in a chapter entitled “Central Problems of Every Economic Society” that a nation has to choose between two options when spending its finite resources. It may buy either guns (invest in defense/military) or butter (invest in production of goods), or a combination of both.

U.S. President Lyndon B. Johnson used the phrase to catch the attention of the national media, while reporting on the state of national defense and the economy. Another use of the phrase was British Prime Minister, Margaret Thatcher's reference in a 1976 speech that, "The Soviets put guns over butter, but we put almost everything over guns.”

The US seems to favour Gums over Butter – so why not drill down into the sector and seek out the Aerospace and Defense names – In the U.S. there are lots of aerospace & defense related companies - L-3 Communications Holdings Inc. (LLL), Lockheed Martin Corp (LMT), United Technologies Corp (UTX), Honeywell International (HON), Boeing Co/The (BA). General Dynamics Corp (GD), Raytheon Co (RTN) and Northrop Grumman Corp (NOC). Many of these names are at or close to new 52-week highs.

The related ETFs are the iShares U.S. Aerospace & Defense ETF (ITA) and the PowerShares Aerospace & Defense Portfolio (PPA) :

In Canada the choices are slim with a few thin traders – such as Magellan Aerospace (MAL) and Heroux-Devtek Inc (HRX). We are left with CAE Inc (CAE) a liquid pure aerospace play. Our chart – monthly of LMT displays a pending new bull cycle – recent all-time highs and strong money flow numbers

Tuesday, June 21, 2016

So – just what is a bull market?

In my previous post I referred to Ned Davis Research who deems that “a  Bear Market requires a 30% drop in the Dow Jones Industrial Average after 50 calendar days or a 13% decline after 145 calendar days.” Also according to Ned Davis Research during a study period from January 2, 1900 through December 31, 2010, (over 100 years) big corrections in the Dow Jones Industrial Average are actually quite rare.

Dips of 5 % or more totalled 378 or 3.4 per year
Corrections of 10 % or more was 122 or about 1 per year
Bear declines of 20 % or more was 32 or about I every 3.5 years

The business media claim that a decline of 20% puts the market into “bear territory.”

At Getting Technical our historical market studies dictate that bear market prints a lower low within a rolling 26 to 30 week time window. In other words – in order to be a bear, a broad stock index like the S&p500 must print a lower low within a rolling six month window – if not – then it is a bull. The S&P500 from late 2012 through June 2016 charted bear is based on a simple 26 week price channel and note the 2 downward violations of Aug 22, 2015 and finally on Jan 22, 2016 – we are now past the 6-month window and so if not a bear then it’s a bull..