Thursday, September 24, 2015

Other bellwethers in trouble:

Back in August 28 I explained the term Bellwether – which 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.

Question – lead to where? Green pastures or to slaughter?

At the time Goldman Sachs (GS) at about $178 had broken down below the 50 and 200 day simple moving averages. Also relevant was the break below a 26-week price channel because Goldman tends to trend within a 6-month price window.

Now we have industrial bellwethers Boeing and Caterpillar trading below their related 50 and 200 day MA’s. Our chart is the weekly bar of a Canadian bellwether – Magna International (MG) breaking below 50&200 day (10&40 week) moving averages. You can also see that Magna has zero capital returns since the Aug 2014 peak. The time to buy the auto stocks is when the US auto sales are bleak like in 2008 when US auto sales were the worst since 1992 – (MG was trading under $10) - not now when the outlook is so bright you need sunglasses.


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