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Energy and Financials Weakest Sectors
by Carl Swenlin
December 11, 2009
EDITOR'S NOTE: We want to welcome our old friend, Tom McClellan, as a new contributor to our Top Advisors Corner section of the website. Tom's Chart In Focus articles will become a regular weekly feature.
On Wednesday two of the sector indexes we track slipped from buy signals to neutral status. All other equity indexes and sectors tracked in our Decision Point Alert Daily Report remain on buy signals, with recent price patterns being similar to that of the S&P 500. The loss of these two buy signals could simply represent a bull market correction in these sectors, or it could be the first sign of broader weakness that could develop into a serious decline. So far the weakness is limited to these two sectors, and there is no reason to think that any serious problems are afoot.
On the contrary, the neutral signals actually alert us to possible buying opportunities in the future. In a bull market we look for corrective action to set up oversold conditions that can be low-risk entry points for new long positions. Neither of these sectors is a buy candidate yet, to say the least; however, when the PMO (Price Momentum Oscillator) and PBI (Percent Buy Index) cross above their moving averages, a new Thrust/Trend Model (T/TM) buy signal will be generated. If you want to be more aggressive, you can act when the PMO turns up or has an upside crossover, but waiting for the signal on the DPA Daily Report is usually best.
Below are charts of the two sectors with their T/TM components. I have also drawn trend lines. Note that Energy is still above its trend line, and the Financials have not made a sharp downside penetration of the trend line as much as they have merely drifted sideways through it.
Gold has begun a correction. Since the recent advance was virtually straight up, the correction could be straight down. For now, let's look for the correction to end when the rising trend line is intercepted -- about 1050.
Bottom Line: We have experienced minor corrections in two sector indexes, but all other equity indexes we track look strong. The S&P 500 is stalled at long-term resistance, but I still think a breakout is possible. Gold is correcting, but I don't think it will be a major correction.
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Technical analysis is a windsock, not a crystal ball. Be prepared to adjust your tactics and strategy if conditions change.
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2009 TIMER DIGEST RANKINGS FOR DECISION POINT
#9 Intermediate-Term Stocks (52-Weeks) (TD Index 129.36 Vs. SPX 123.45)
#8 Intermediate-Term Stocks (5 Years) (TD Index 147.81 Vs. SPX 92.01)
#18 Bond Timer (*TD Index: 87.7 Vs. Bonds 83.86)
#5 Bond Timer (10-Years) (*TD Index: 127.25 Vs. Bonds 127.51)
#9 Gold Timer (TD Index: 115.30 Vs. Gold 124.00)
#3 Gold Timer (3 Years) (TD Index: 181.56 Vs. Gold 169.92)
#3 Gold Timer (10 Years) (TD Index: 322.74 Vs. Gold 375.51)
#6 Long-Term Timer (2 Years) Stocks (TD Index 136.41 Vs. SPX 75.94)
#7 Long-Term Timer (3 Years) Stocks (TD Index 141.22 Vs. SPX 78.62)
#2 Long-Term Timer (5 Years) Stocks (TD Index 165.27 Vs. SPX 92.01
#5 Long-Term Timer (10 Years) Stocks (TD Index 162.51 Vs. SPX 75.90
2008 TIMER DIGEST RANKINGS FOR DECISION POINT
#17 Intermediate-Term Stocks (52-Weeks) (TD Index 111.9 Vs. SPX 61.51)
#4 Bond Timer (*TD Index: 112.32 Vs. Bonds 118.26)
#5 Gold Timer (TD Index: 126.33 Vs. Gold 104.61)
#9 Long-Term Timer (2 Years) Stocks (TD Index: 132.35 Vs. SPX 63.69)
#2 Long-Term Timer (3 Years) Stocks (TD Index: 150.38 Vs. SPX 72.36)
#2 Long-Term Timer (5 Years) Stocks (TD Index: 168.82 Vs. SPX 81.23)
#3 Long-Term Timer (10 Years) Stocks (TD Index: 159.36 Vs. SPX 73.48)
2007 TIMER DIGEST RANKINGS FOR DECISION POINT
#40 Intermediate-Term Stocks (52-Weeks) (TD Index 91.9 Vs. SPX 103.28)
#5 Bond Timer (TD Index: 105.85 Bonds 104.39)
#2 (Tied) Long-Term Timer (2 Years) Stocks (TD Index: 117.63 Vs. SPX 117.63)
2006 TIMER DIGEST RANKINGS FOR DECISION POINT
#11 Intermediate-Term Stocks (52-Weeks) (TD Index 111.3 Vs. SPX 113.6)
#3 Bond Timer (TD Index: 112.32 Vs. Bonds 97.46)
2000 TIMER DIGEST GOLD TIMER of the YEAR
*All timers and the benchmark index are assigned a starting TD Index of 100 at the beginning of the year. The amount above or below the starting index indicates the percentage gain or loss for the year.
Beginning in 2006 we began using mechanical models -- the Trend Model for Bonds, Gold, and Long-Term Stocks, and the Thrust/Trend Model for Intermediate-Term Stocks. Prior to 2006 we used discretionary signals.
Nothing herein should be construed as an offer or solicitation to buy or sell any security. Past performance does not indicate future results.
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BIO: Carl Swenlin is a self-taught technical analyst, who has been involved in market analysis since 1981. A pioneer in the creation of online technical resources, he is president and founder of DecisionPoint.com, a premier technical analysis website specializing in stock market indicators, charting, and focused research reports. Mr. Swenlin is a Member of the Market Technicians Association.
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