As expected, traders returned from Labor Day vacations to take some profits off the table. While selling volume wasn’t particularly intense, it was enough for 2 consecutive days of distribution indicating the big fellas were taking some profits off the table. Nothing to be alarmed about at this point, but worth keeping an eye on. The big event for next week will be Friday’s CPI data and how the market reacts will reveal a big clue as to the health of this market. One underlying shift with potentially big implications is declining crude prices, which over time could dramatically decrease inflation concerns and be the catalyst this market needs to break out to multi year highs. Looking at a long term chart of light crude (continuous contract), it broke through a 3 year trend line at the end of August and more recently broke through support of the 200 day moving average (http://www.selfinvestors.com/crude91006.jpg). Crude is oversold in the short term and most likely will see some bounce, but the technical damage is done. It’s going to be a long time before we see $80 crude and that bodes well for the bulls.
** Model Portfolio Update **
The Model Portfolio held up well in a down week.. and managed to eak out a gain of .2%. With the market reaching lofty levels and profit taking underway, I shifted the weight of the portfolio more to the short side by closing 2 long positions and initiating 3 new short positions (all of which closed the week with a profit). Long positions were closed in Cognizant Tech Solutions (CTSH) and True Religion (TRLG). While both don’t look particularly weak, they don’t look particularly strong either. As part of a strategy shift in an increasingly choppy market, I don’t hesitate to dump a stock if it’s not showing great strength. There are too many other opportunities out there and you can always buy them back. In particular, with CTSH I plan to buy the stock back if it proves itself by breaking above 72 with great volume. With a 16.2% year to date return, the strategy is paying off. Current prtfolio allcocation is roughly 35% short, 35% long and 30% cash. Should the market hold up reasonably well next week, I plan to add a long position or two.
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A couple weeks ago I sent out a report to premium members highlighting my top break stocks for the coming week. At the top was US Global Investors (GROW), which soon thereafter vaulted more than 30%. I’m about to release two new top breakout plays (and no you won’t see these in the IBD 100!) off the radar of most traders and on the verge of big time moves. Get these picks and full access to all member tools and reports with your *free* 30 day premium trial. Just login to your account page at http://www.selfinvestors.com/amember/member.php and sign up in seconds!
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** Best/Worst Performers **
– Top 10 Performing Industries For the Week –
1. Pollution & Treatment Controls 5.19%
2. Dairy Products 5.08%
3. Long Distance Carriers 4.73%
4. Discount – Variety Stores 3.55%
5. Department Stores 3.52%
6. Lodging 2.71%
7. Apparel – Footwear 2.68%
8. Aerospace/Defense 2.43%
9. Restaurants 2.36%
10. Auto Parts Stores 2.06%
– Top 10 Worst Performing Industries For the Week –
1. Oil & Gas Refining & Marketing -5.41%
2. Shipping -5.18%
3. Water Utilities -5.02%
4. Manufactured Housing -4.66%
5. Data Storage Device -4.49%
6. General Contractors -4.21%
7. Auto Parts -4.20%
8. Industrial Metals & Minerals -3.92%
9. Independent Oil & Gas -3.86%
10. Medical Laboratories & Researc -3.85%
– Top 5 Best Performing ETFs For the Week –
1. HLDRS Retail (RTH) 2.09%
2. Ishares Tawian (EWT) 1.76%
3. PowerShares Retail (PMR) 1.69%
4. Ishares Singapore (EWS) 1.43%
5. Ishares Consumer Services (IYC) 1.19%
– Worst 5 Performing ETF’s –
1. Ishares Silver (SLV) -6.03%
2. Powershares Dynamic Energy (PXE) -4.87%
3. Central Europe & Russia (CEE) -4.74%
4. Ishares South Africa (EZA) -4.59%
5. PowerShares Clean Energy (PBW) -3.97%
** No IPO’s Worth Watching for This Week **
** Upcoming Economic Reports (9/11/06- 9/15/06) **
Monday: None
Tuesday: Trade Balance, TIPP Economic Optimism, Retail Sales
Wednesday: Treasury Budget, Petroleum Status, Mortgage Apps
Thursday: Money Supply, Import Price Index, Business Inventories, Jobless Claims
Friday: CPI, Industrial Production, Real Earnings, Manufacturing Index, Consumer Sentiment
** Latest Blog Entries – In Case You Missed Them!**
– SelfInvestors Blog –
Self Investors Leading Breakouts Soar to New Heights, But.. I’m Stil Cautious (Sept. 5th)
http://investing.typepad.com/tradingstocks/2006/09/selfinvestors_l.html