It’s days like today that really reveal the weakness or in this case strength of a market. China’s continued attempt to slow its market brought the bears out from hiding, but as we’ve seen over the past few months they just couldn’t exert any control. Traders continue to see these dips as buying opportunities rather than a signal to head for the exits. It wasn’t long before the entire gap down was erased and hawkish Fed statements (no life in housing, concerns over inflation) added fuel to the fire on renewed hopes of a rate cut. That sent shorts scrambling and the Dow to a new all time high. While volume levels weren’t all that impressive (just a hair above average), today’s action does constitute a day of accumulation. So, was last Thursday’s big distribution just an aberration? Considering selling volume on that day and the trend towards distribution over the past couple weeks, the answer is no in my opinion. I still believe this market is running out of gas, but how long it will run on fumes is anyone’s guess. With an avalanche of economic data coming in the next two days, we’ll have a much better idea.
::: Major Indices Performance – The Numbers :::
(Note: volume averages are based on the average over the past 50 days)
Data as of 4:00EST – End of Day May 30th 2007
Accumulation in all indices.
Nasdaq: UP .80% today with volume just a hair ABOVE average
Nasdaq ETF (QQQQ) UP .81%, volume 25% ABOVE average
Dow: UP .83%, volume also just a hair ABOVE the average
Dow ETF (DIA): UP .78%, volume 44% ABOVE the average
S&P ETF (SPY): UP .81%, volume 23% ABOVE the average
Russell Small Cap ETF (IWM): UP .56%, volume 8% ABOVE the average
::: SelflInvestors Leading Stocks :::
The Self Investors Leading Stocks Index is comprised of stocks in the Breakout Tracker, which is a database of the fastest growing companies near a breakout or having already broken out of a base. Leading stocks fared well today and beat the performance of the major indices. However, there wasn’t a ton of conviction behind the move in leading stocks today.
Summary:
* Advancers led Decliners 320 to 100
* Advancers were up an average of 1.67% today, with volume 2% ABOVE average
* Decliners were down an average of 1.32% with volume 12% ABOVE average
* The total SI Leading Stocks Index was UP .95% today with volume 4% ABOVE the average
::: Where’s the Money Flowing :::
Many investing websites provide leading industries based on price performance alone. However, without accompanying volume levels, this can sometimes be misleading. The only way that I know of to gauge industry/sector strength WITH volume levels is through the analysis of ETF’s. A couple years ago this was not possible, but as more traders/investors use ETF’s they become a much better tool for gauging the health of the market and seeing where the money is flowing (or not flowing). Using the proprietary SelfInvestors Demand Indicator score which measures price and volume movements, I’m able to quickly see which sectors/industries are seeing the greatest inflows of cash. For a detailed look at how I go about gauging sector/industry strength please see the following post: http://selfinvestors.com/si/industry_tracking/
* Current Leading Sectors/Industries (over last 30 trading days):
Semiconductors, Transports, Agriculture, Networking, Nanotech, Aerospace/Defense
* Current Lagging Sectors/Industries (over last 30 trading days):
Gold Miners, Biotech
* Today’s Market Moving Industries/Sectors (UP):
Real Estate, Telecom, Materials, Utilities
* Today’s Market Moving Industries/Sectors (DOWN):
Gold, Semis
::: Stocks :::
The stocks section will be an area where I highlight one stock selected from a group of stocks moving up with volume well above average and most likely breaking out of a base or consolidation. Today’s stock is Heico (HEI), which broke out to a new all time high following an impressive earnings report.
ABOUT: HEICO Corporation (HEICO), through its subsidiaries, is a manufacturer of Federal Aviation Administration (FAA)-approved jet engine and aircraft component replacement parts, other than the original equipment manufacturers and their subcontractors. HEICO is also a manufacturer of various types of electronic equipment for the aviation, defense, space, medical, telecommunications and electronics industries. It operates in two business segments: The Flight Support Group and The Electronic Technologies Group. HEICO’s Flight Support Group consists of HEICO Aerospace Holdings Corp. (HEICO Aerospace) and its subsidiaries, which accounted for 71% of its net sales during the fiscal year ended October 31, 2006 (fiscal 2006). Its Electronic Technologies Group consists of HEICO Electronic Technologies Corp. and its subsidiaries, which accounted for 29% of its net sales in fiscal 2006. In May 2006, HEICO, through its HEICO Aerospace Holdings Corp. subsidiary, acquired Arger Enterprises, Inc.
FUNDAMENTALS: Heico (HEI) has not only posted outstanding growth over the past three years (about 30% year over year), but it’s done so with consistency from quarter to quarter. While growth is expected to slow just a bit, the company is expected to continue to post very good growth over the next 2 years of about 20%. Add to that solid net margins and ROE of about 11% and strong management ownership of 30% and Heico is a company that should keep flying high.
TECHNICAL: After reporting earnings that beat the whisper of .34 cents a share (they reported .35) and boosting its full year outlook, the stock broke out of a 6 month base to a new all time high. With today’s volume coming in at nearly 4x the daily average, this is a strong breakout. This kind of action typically signals further upside action in the coming weeks. It should be noted that the stock is a thin one (trades just 61K shares a day on average), so it can be volatile at times.
SELFINVESTORS RATING: With a total score of 50/60 (26/30 for fundamentals, 24/30 for technical), Heico (HEI) is a very good breakout stock.
Full Disclosure/Disclaimer: The stock of the day is by no means a buy recommendation. Please do your own research and make a personal decision based on your own tolerance for risk. I currently do not own a position in Heico (HEI).