Archive for industry
The period of seasonal strength for platinum is from January 1st to May 31st. The primary driver for this period of seasonal strength is the auto industry ordering platinum for catalytic converters and investors optimistically anticipating increased car sales at the beginning of the year.
Platinum has been very strong since the beginning of the year. Since July it has been in an upwards trading channel that has been very tight and the 50 day moving average has been providing support. We are currently at the top of the trading channel and if platinum is able to breakthrough this it will be very positive. If Platinum does correct at this point, there is a strong likelihood that platinum will bounce of the bottom of its trading channel once again. Up until recently, investors really only had one ETF to use as a vehicle to invest in platinum (iPath ETN DJ-AIG Plat A, Symbol PGM). At the end of last week ETF Securities launched a platinum ETF (PPLT) that holds platinum (metal) in a vault.
The period of seasonal strength for platinum is from January 1st to May 31st. The primary driver for this period of seasonal strength is the auto industry ordering platinum for catalytic converters and investors optimistically anticipating increased car sales at the beginning of the year. Last year platinum increased 29% during its seasonally strong period. Unlike gold, platinum is still well below its high set in 2008. Platinum has been increasing and has recently broken out of its trading channel, which is a positive indication.
Platinum is shaping up to be a good opportunity for the end of the year/beginning of the next year.
The stock market has had a good run since March 9th. Both the S&P 500 and the TSX Composite have climbed 36%. More recently the S&P 500 has shown signs of tiring and has been bumping up against the 940-950 range. Currently the index sits at 900. This point is at both the 50 and 200 day moving averages, with the market moving sideways for the last while a breakdown at this point would have negative implications in the market. Conversely, if the market is able to break through resistance and the downward sloping channel line on strong volume, the short-term outlook for the market would be positive.
Given that we are in the non-favourable season (beginning of May to the end of October) of the market, a strong run in the index has a low probability of happening. Over the next two weeks it is possible for the markets to produce positive action as the market can sometimes extend a top into mid-July and the time around Independence Day tends to be positive (discussed later in newsletter). It is the time period after July 19th that will present possible corrections of magnitude.
Another indicator that has recently turned down is the NYSE – BPI. After topping out at 75, the indicator is now sitting at 58 – a negative indication.
The Bullish Percent Index (BPI) is a popular market breadth indicator that is calculated by dividing the number of stocks in a given group (an exchange, an industry, etc.) that are currently trading with Point and Figure buy signals, by the total number of stocks in that group. Bullish Percent levels that are above 70% are considered overbought, whereas levels below 30% are considered oversold. Strong buy signals occur when the Bullish Percent Index falls below 30% and then reverses up by at least 6%. Conversely, promising sell signals occur when it goes above 70%, and then reverses down by at least 6% (Source: Stockcharts.com).
The biotech sector is often thought of as the poor cousin to the technology sector. Investors turn their interest to biotech when they want to be more speculative but do not want to invest in technology stocks.
Biotech stocks tend to outperform the S&P 500 from June 25th to September 13th. From 1992 – 2008, biotech stocks (XBI – SPDR Biotech ETF) beat the S&P 500 14 out of 16 times and had an average gain of 13.5%. During this time period the S&P 500 had an average gain of 0.1%.
The chart below shows that the biotech sector is lining up for a good trade once again. The sector is currently at long term support and has just broken through the 50 dma. The trades for the last three years are shown with green arrows for a buy and red arrows for a sell. Interestingly, despite the poor performance of almost every sector last year during the summer, biotech produced a healthy positive return.
The biotech sector tends to go up from the end of June until the mid-September because investors stake a position ahead of the autumn conferences that tend to provide a positive outlook in the industry. Positive returns in this sector would definitely be good medication in the current market.