Just over a month has elapsed since I concluded that S&P 500 was reaching a short-term bottom but would not challenge its 52-week highs (set in January) for “many months to come.” On Thursday, the S&P 500 printed a new 52-week closing high by one penny. On Friday, the index made a new intra-day high by a few dollars before closing lower. All this action occurred on light volume – as usual. (Chart not shown.)
Despite the unconvincing action on the S&P 500, cyclicals and consumer-related stocks and indices have had very convincing and strong moves upward to fresh 52-week highs. So, I decided to review the stocks whose “climactic tops” helped convince me that sellers were making a lasting statement in January and early February. Interestingly enough, all three stocks/ETFs remain below their 52-week highs: Intel (INTC), Caterpillar (CAT), and Health Care Select Sector SPDR ETF (XLF).
Of these three, INTC is the closest to a new 52-week high, and CAT seems most likely to follow the market if it makes a new bullish run from here. XLV is likely a prisoner of news headlines on healthcare reform and should trade more closely to real-time news flow than in anticipation of news as reform efforts reach final stages.
Here are the latest charts:
INTC is essentially trapped in a trading range. I suspect a new 52-week high will be just as marginal as January’s. While the NASDAQ was powering ahead on fresh 52-week highs all of last week, INTC has kept pace with the technology index with an overall 4.2% year-to-date gain. I still do not expect INTC’s near-term earnings performance to improve enough to make it worth a buy at these levels although the dividend yield remains attractive at 3%.
With Friday’s 2.5% gain on decent volume, CAT finally looks poised to retest its 52-week high. I am watching this one closely. I like to get (net) long CAT as one way to get long the market or to hedge bearish bets. CAT’s climactic top was extremely dramatic and convincing, so new highs for CAT would mark a very bullish moment for the market in general.
XLV’s top looks most likely to hold of the three charts reviewed here. The selling after January’s highs was massive and sustained. For now, I am looking for new entries for short positions in XLV and/or its health insurance components. XLV has done little this month. It is in a technically neutral position although it rests comfortable above support at the 50-day moving average (DMA).
*All charts created using TeleChart:
Be careful out there!
Full disclosure: net long CAT, long SSO puts
Intel – has for the past few years has reacted to good news by hitting a moderate top and then going back to it’s old habits (recently below 20) is it time to break the mold? Yes. Full Disclosure I have a substantial # of Jan 2012 $10 Calls – One of the greatest companies and success stories in the World.
Thanks for your Stuff Dr. Duru!!!
You’re welcome! I will be watching INTC closely. Apparently, today’s spike came as rumors circulated that INTC will be pre-announcing an upside surprise for earnings this week. HEAVY activity in the Mar 21 and Mar 22 calls today.
Dr. Duru:
This is a post I made at another site this early am
I am after all a trader of 15 min bars in a high VIX market – but this time is not for trading – I believe. This is a great time to pick “Good Blood Stock” and ride it with the wind.
INTC is by far the largest holding I have. Actually they are long term Calls (2012)
Looking at a 48 Month Chart (monthly) the first 24 months was a H&S and true to the pattern – the stock price dropped to the destination of the chart. The 2nd 24 Months is now an inverse H&S – so the projection
would be a $30 price point –
Full Disclosure
We are about to begin a robust Electronic/Digital era – The economy is going to “BURST” out – Unemployment at 10% – even so…. there is going to be a new class of people to carry – and 10% is going to be the #.
INTC is also a Mutual Fund of as many as 300 companies – many unknown – but will be feeders to INTC in a broader market – I believe INTC is also a 3% dividend company.
I’m sure many of you will doubt my H&S pattern for the most recent 24 months – so, I’ll play my game and you play yours. I have just put my teeth in and am about to eat my Oatmeal –
Full Disclosure by weight: INTC, NVDA, EEM, CLWR, S,
Wow – you are truly committed! I wish you luck. INTC is always on my radar, but I prefer to join in on the dips. I decided not to hop on during the latest dip and pursued other tech names. INTC’s historical performance during the last bull market still concerns me, so I continue to examine INTC one quarter at a time.