The Coal ETF, Gold / Agriculture Topping? Time to Play Financials / Homebuilders?

Posted By Tate Dwinnell |  Subscribe in a reader | Comment 0

For this week’s market report I’m doing something a bit different by highlighting moves in certain sectors through ETF’s to get a good picture of the overall market.  I’ll have analysis of the major indices following any significant moves next week.

In the last ETF review, I discussed the opposite trends of gas and oil – oil generally breaking down, while natural gas appears to be in the beginning stages of new major uptrend.  Note the double botton base in the US Natural Gas Fund and a beak of the downward trend.  It’s overbought in the short term, but natural gas appears to be in play on the long side for 08.

Oil did indeed break down in a big way but has retraced much of that move back to resistance.  I think it’s probably setting up for another move down soon to test the lows of the correction.  The Energy Select SPDR ETF (XLE) is hitting resistance of the 200 day moving average.

Interested in leveraging up on another move down in oil?  Then DUG is your tool.  It seeks to return twice the inverse of the move in oil. 

Topping High Flyers?

Gold and Agriculture stocks have been flying but showing some signs of deterioration, at least in the short term.

Gold broke out of a nice looking bullish triangle formation back in December and is carving out another.  However, this triangle formation is showing some heavy selling and more likely prone to failure.  My guess is that it needs to form a more substantial base than a short triangle in order to coil the spring for a move to 1000/oz and beyond.  If this triangle is broken up here, look for a move to the 50 day moving average around 86, where it has found support in the past.

The Powershares Agriculture ETF (DBA) just keeps pushing higher, but topping signals are beginning to appear.  The high volume reversal on Feb 6th was the first.  Perhaps it hits psychological resistance around 40 and fails.  This thing is well overdue for a correction, but it won’t happen until it can take out that 20 day moving average, which it has been trending along for several months.

Left for Dead, Now Bottoming Out? Homebuilders & Financials

I’ve written about the bottoming homebuilders on a couple of occasions in the past several weeks and admittedly received some flak from people for making the first call.  Then they ran up 50% and the talking heads began to call a bottom.  That’s when I wrote up my 2nd report mentioning they were bottoming but very overbought in the short term (time to profit on the short side!).. and profit we did!  So where do we stand now?

The homebuilders continue to retrace that big ramp up out of downward trends and in my opinion getting close to ending this consolidation phase and beginning a new leg up.  The sell volume on Friday was a bit on the heavy side, so I think there is the possibility of more consolidation (maybe another 5 – 10%)  The key is not trying to jump in too early and wait for a new leg up to emerge.  In other words you want to wait for big buyers to step in again and start buying just as they did the first time around. 

Financials are trading in near tandem with the builders.  The big run up after the Fed cuts, followed by a retracement of that move.  I think the financials are a bit closer to beginning a new leg up then the builders are, but I want to see sell volume diminish to about half of the average followed by another big surge in buying.   I do think the financials bottomed though as a whole.  That certainly doesn’t mean individual financial names couldn’t continue to slide further or go bankrupt. 

New Kid on the Block – Market Vectors Coal ETF (KOL)

Coal has been hot of late and recently has been receiving much mainstream attention at lofty levels.  No wonder coal names have begun to see some correcting.  I think that continues for a bit longer, but coal does seem like another good play in 08 once it retraces some of this move up.  KOL is a new ETF from Market Vectors that began trading in January.  It’s liquid enough out of the gates to consider as a good, diversified way to play coal.

 ::: Model Portfolio :::

** This section will now appear as a separate report to be published every other Wednesday

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::: Best/Worst Performers :::

– Top 10 Performing Industries For the Week –

1. Rubber & Plastics: 10.70%
2. Internet Service Providers: 10.70
3. Aluminum: 8.90%
4. Heavy Construction: 7.80%
5. CATV Systems: 7.45%
6. Oil & Gas Equipment Services: 6.30%
7. Nonmetallic Mineral & Mining:  5.50%
8. Steel & Iron: 5.45%
9. Broadcasting – Radio: 5.15%
10. Shipping: 5.10%

– Top 10 Worst Performing Industries For the Week –

1. Toy & Hobby Stores: -12.00%
2. Surety & Title Insurance: -8.90%
3. Manufactured Housing: -5.45%
4. Education & Training Services: -5.15
6. Jewelry Stores: -4.90%
7. Electronic Stores: -4.75%
8. Gaming Activities: -4.25%
9. Medical Practitioners: -4.20%
10. Healthcare Info Providers: -3.90%

– Top 5 Best Performing ETFs For the Week –
1. Market Vectors Global Alernative Energy (GEX) 10.35%
2. Market Vectors Nuclear Energy (NLR)  8.85%
3. Powershares China (PGJ) 7.55%
4. Market Vectors Russia (RSX) 7.50%
5. Ishares Sweden (EWD) 6.40%

– Worst 5 Performing ETF’s –

1. Ishares Home Construction (ITB) -3.45%
2. KBW Banking (KRE) -3.20%
Powershares High Yield Dividend (PEY) -2.45%
4. SPDR Gold (GLD) -2.05%
5. SPDR Homebuilders (XHB
) -2.00%

:::  IPO’s Worth Watching for This Week :::

This section will now appear as a separate post on Mondays if there are some interesting IPO’s coming to market.

While 2008 should be a much slower year for IPO’s considering the deterioration of the market, there will continue to be some good companies coming to market here and there.  I’ll be highlighting the best IPO’s every Monday.

::: Upcoming Economic Reports (2/18/2008– 2/22/2008) :::

Monday:         None
Tuesday:       None
Wednesday:  CPI, Building Permits, Housing Starts, FOMC Minutes
Thursday:      Leading Indicators, Initial Claims, Philly Fed
Friday:            None

::: Earnings I’m Watching This Week :::

Walmart (WMT), China Fire & Security (CFSG), Fossil (FOSL), Crocs (CROX), iRobot (IRBT)

Garmin (GRMN), Transocean (RIG), Given Imaging (GIVN), Sina (SINA)

The (TSCM), Morningstar (MORN), Hornbeck Offshore (HOS), ICON (ICLR), ANSYS (ANSS), Pan American Silver (PAAS)
Ritchie Bros. Auctioneers (RBA), GFI Group (GFIG), Blue Coat Systems (BCSI), Cleveland Cliffs (CLF)

Life Time Fitness (LTM)

::: In Case You Missed It – SelfInvestors Blog Entries of the Past Week :::

1. Yahoo Rejects Microsoft, Google Wins

2. Technicals Improving, But Significant Risk Remains

3. Gaiam (GAIA) to Spinoff Real Goods Solar (RSOL)

4. Focus on the Present to Improve the Future

5. Market In Need of Some Roger Clemens Juice; Stock of Day – Balchem (BCPC)

6. Jim Cramer Credibility Problem Part Deux

4. Stop, Drop and Think

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