The search for income takes investors to diverse places, and tobacco stocks have been a favorite for many months. However, all trends eventually come to an end, and that seems to be the case for the rally in Reynolds American (NYSE: RAI). #-ad_banner-# Since its early July peak, the stock is down about 7%. This includes a rather sharp sell-off on July 26 following the cigarette maker’s disappointing second-quarter earnings report. The company missed both revenue and earnings estimates, and the post-earnings sell-off… Read More

The search for income takes investors to diverse places, and tobacco stocks have been a favorite for many months. However, all trends eventually come to an end, and that seems to be the case for the rally in Reynolds American (NYSE: RAI). #-ad_banner-# Since its early July peak, the stock is down about 7%. This includes a rather sharp sell-off on July 26 following the cigarette maker’s disappointing second-quarter earnings report. The company missed both revenue and earnings estimates, and the post-earnings sell-off resulted in a technical breakdown through a rather important trendline. This week, Cowen and Company reaffirmed its “outperform” rating on the stock, saying that weak guidance was already priced in, but the market is saying otherwise.  RAI has been lagging the broader market since February and shows no signs on the charts that this condition will change. There are plenty of other technical warnings in place, including the non-confirmation of the July high by momentum and volume indicators, but let’s focus on the pure and simple trend break.   Reynolds started its long-term bull market in 2009 when… Read More

When it comes to what people say versus what the market says, I think it is wisest to listen to the market. Just look at mining machinery maker Caterpillar (NYSE: CAT), which fell almost 1% in premarket trading on Tuesday after the company beat second-quarter earnings estimates but reported declines in profit and revenue. To top things off, the company offered one of the gloomiest year-end outlooks of the earnings season. Tell that to the market, though. That very day, after a weak premarket, the stock closed higher to the tune of 5%. Not only that, it scored a technical… Read More

When it comes to what people say versus what the market says, I think it is wisest to listen to the market. Just look at mining machinery maker Caterpillar (NYSE: CAT), which fell almost 1% in premarket trading on Tuesday after the company beat second-quarter earnings estimates but reported declines in profit and revenue. To top things off, the company offered one of the gloomiest year-end outlooks of the earnings season. Tell that to the market, though. That very day, after a weak premarket, the stock closed higher to the tune of 5%. Not only that, it scored a technical breakout, which we will get to momentarily. The company stated that global uncertainty, including the Brexit and the turmoil in Turkey, have increased risks. I’m not a fundamental analyst, but it seems to me that sort of news would boost the mining of precious metals, and indirectly, the use of Caterpillar’s equipment. Indeed, the gold market has been on the rise all year. But let’s stick to the charts. As we can see, Caterpillar broke out last week to the upside. Volume was rather heavy, too, validating the change in tone for the stock. And it is likely no coincidence… Read More

After a record-setting rally in bonds, the better-than-expected June jobs report gave bond traders an excuse to bank some fat profits. However, a look under the hood shows that, structurally, nothing has really changed. The bull market in bonds and trend toward lower interest rates remain intact. And that is why I’m now looking for a good place to buy the dip… in the utilities sector. #-ad_banner-# Despite this week’s pause in bond prices, the yield curve — the yield on the 10-year Treasury note minus the yield on the… Read More

After a record-setting rally in bonds, the better-than-expected June jobs report gave bond traders an excuse to bank some fat profits. However, a look under the hood shows that, structurally, nothing has really changed. The bull market in bonds and trend toward lower interest rates remain intact. And that is why I’m now looking for a good place to buy the dip… in the utilities sector. #-ad_banner-# Despite this week’s pause in bond prices, the yield curve — the yield on the 10-year Treasury note minus the yield on the two-year note — is still in a flattening trend and narrower than it has been in years. The flatter it gets, the more likely the economy will see problems. Banks in particular find it more difficult to profit when their cost of money, borrowed at the short-term rate, is close to or even greater than revenue received at the long-term loan or mortgage rate. The trend around the world is for government bonds to offer negative interest rates. Given the choice between German or Swiss bonds at negative yields and the 10-year U.S. Treasury note at 1.5%, it’s pretty obvious… Read More

The banking sector is down so much it almost seems risky to sell it further. However, to paraphrase the song, that’s what trends are for. #-ad_banner-# While the S&P 500 has nearly recovered all of its losses from the Brexit panic, Capital One Financial (NYSE: COF) is down over 6% from its pre-Brexit close. Looked at another way, while the broader market index is not far off its 52-week highs, COF is much closer to its 52-week lows. The question is, how long can banks stay low as the broader… Read More

The banking sector is down so much it almost seems risky to sell it further. However, to paraphrase the song, that’s what trends are for. #-ad_banner-# While the S&P 500 has nearly recovered all of its losses from the Brexit panic, Capital One Financial (NYSE: COF) is down over 6% from its pre-Brexit close. Looked at another way, while the broader market index is not far off its 52-week highs, COF is much closer to its 52-week lows. The question is, how long can banks stay low as the broader market holds firm? If you believe in trends — as you should — then that is a question for the market to answer. The trend in Capital One is down since its April rally high and down from its July 2015 all-time high. In the absence of strong evidence to the contrary, there is no reason to suspect COF’s bear market is over. And that means selling bounces can be a lucrative strategy. Let’s start with the big picture. As we can see in the chart, the bull market from 2009 ended in 2015 with a trendline breakdown and test… Read More

With the Brexit dominating the news and fraying traders’ nerves, it seems crazy to think a footwear maker would be poised to rally by double digits. However, the chart of Crocs (Nasdaq: CROX), the maker of some rather odd shoes, is beautifully set up to do so. Crocs is a love-to-hate brand. Its “ugly” shoes are revered by fans for their comfort and functionality much to the horror of anyone with a fashion sense. Fortunately, we don’t need to concern ourselves with the company’s reputation. The only thing that matters is gains, and that is what the stock is poised… Read More

With the Brexit dominating the news and fraying traders’ nerves, it seems crazy to think a footwear maker would be poised to rally by double digits. However, the chart of Crocs (Nasdaq: CROX), the maker of some rather odd shoes, is beautifully set up to do so. Crocs is a love-to-hate brand. Its “ugly” shoes are revered by fans for their comfort and functionality much to the horror of anyone with a fashion sense. Fortunately, we don’t need to concern ourselves with the company’s reputation. The only thing that matters is gains, and that is what the stock is poised to deliver. After being in a downtrend since 2011, which accelerated in 2015, Crocs stabilized in a range this year. Following an analyst downgrade in April, the stock fell sharply and even dipped below support to a new multiyear low. But within days, better-than-expected earnings caused shares to soar. The post-earnings rally left several seriously bullish markers on the chart. First, it negated the breakdown. Failed bearish signals are often new bullish signals, and within one day, CROX returned to the top of its range. The rally also left a bullish key outside-day reversal on the weekly charts. Read More

Over the past week, global markets reacted sharply to the terrible news that a British lawmaker was murdered for her view that the U.K. should remain in the European Union. It’s believed this will push undecided voters to choose to remain. #-ad_banner-#As fears of a Brexit wreaking havoc on the markets subsided, oversold stocks, European currencies and even domestic interest rates rallied quickly. But this week, when it seemed even more traders jumped on board with the rally, basic materials stocks appeared to fail. While steel, paper and chemicals stocks… Read More

Over the past week, global markets reacted sharply to the terrible news that a British lawmaker was murdered for her view that the U.K. should remain in the European Union. It’s believed this will push undecided voters to choose to remain. #-ad_banner-#As fears of a Brexit wreaking havoc on the markets subsided, oversold stocks, European currencies and even domestic interest rates rallied quickly. But this week, when it seemed even more traders jumped on board with the rally, basic materials stocks appeared to fail. While steel, paper and chemicals stocks did gain, they closed near their lows of the day Monday. And those that held on better fell on Tuesday as the broader market gained. This tells us something is amiss in the group — no matter what happens with the Brexit vote. After all, basic materials are on the bottom of the economic food chain, as they supply the inputs to many other industries. One stock that fared particularly poorly was chemicals maker Olin Corp. (NYSE: OLN). The company manufactures products such as caustic soda, bleach, vinyl and sporting ammunition. On the chart, we can see Monday’s bearish outside-day… Read More

If there is one thing the banking sector hates, it is a flat yield curve. And the way the bond market is acting right now, there seems to be one on the way. The traditional banking business borrows money at short-term rates and lends it out at long-term rates. Currently, the spread between the benchmark 10-year Treasury rate and the 2-year rate, which is the proxy for the yield curve, is at levels not seen since late 2007. For context, the spread went negative in late 2006, meaning the yield curve was inverted. Economists note that… Read More

If there is one thing the banking sector hates, it is a flat yield curve. And the way the bond market is acting right now, there seems to be one on the way. The traditional banking business borrows money at short-term rates and lends it out at long-term rates. Currently, the spread between the benchmark 10-year Treasury rate and the 2-year rate, which is the proxy for the yield curve, is at levels not seen since late 2007. For context, the spread went negative in late 2006, meaning the yield curve was inverted. Economists note that an inverted yield curve is often a precursor to a recession, and in the stock market at that time, the writing was on the wall. While big international banks have diverse business interests, smaller banks still rely on lending money to individuals and businesses, making their fortunes much more intimately connected to the yield curve. If there is no money to be made borrowing short and lending long, their profits will suffer. The SPDR S&P Regional Banking ETF (NYSE: KRE) is a good representation of the sector, and we can see in the chart below that it sports bearish technicals. … Read More

In April, the technology sector looked like it was about to break down in a big way. However, it turned out to be a false alarm that merely let bulls buy at better prices.  Within the sector, there was also something bullish going on just below the surface: Semiconductor stocks, which were the tech standard in the 1990s, were finally participating… and in a good way.  #-ad_banner-# Some semi stocks soared in May after releasing earnings, and that should have been a tip… Read More

In April, the technology sector looked like it was about to break down in a big way. However, it turned out to be a false alarm that merely let bulls buy at better prices.  Within the sector, there was also something bullish going on just below the surface: Semiconductor stocks, which were the tech standard in the 1990s, were finally participating… and in a good way.  #-ad_banner-# Some semi stocks soared in May after releasing earnings, and that should have been a tip off that things were improving for most of the group. After all, if there is enough business for some companies to thrive, chances are there is enough to go around, even in a sector that is as diverse as this one.  So now I’m on the lookout for laggards in the sector that are on the move, and the one I like is Maxim Integrated Products (Nasdaq: MXIM), a manufacturer of linear and mixed-signal integrated circuits.  Although the stock now trades in the middle of its 52-week range and is still only a shadow of its pre-2000 tech bubble self,… Read More

It is amazing how a stock can be a rock star one day and a pariah the next. Whereas the rock star shrugs off bits of bad news, the pariah can’t seem to get out of its own way. But when everyone seems to be shunning a stock, good things can start to happen. And that’s exactly what looks to be the case with Apple (Nasdaq: AAPL) following its fall from grace. #-ad_banner-# After years of cranking out new products and… Read More

It is amazing how a stock can be a rock star one day and a pariah the next. Whereas the rock star shrugs off bits of bad news, the pariah can’t seem to get out of its own way. But when everyone seems to be shunning a stock, good things can start to happen. And that’s exactly what looks to be the case with Apple (Nasdaq: AAPL) following its fall from grace. #-ad_banner-# After years of cranking out new products and disrupting different consumer markets, the tech giant’s stock peaked early last year — long before it reported its first quarterly revenue decline in 13 years — and it has been falling ever since.  What happened to the company that was seemingly on track to become the first with a trillion-dollar market capitalization? Just over a year ago, it was valued at $775 billion, but it now “languishes” at $536 billion and has seen Alphabet (Nasdaq: GOOGL) eclipse it as market cap champ more than once this year.  At its lows earlier this month, Apple was down by more than a… Read More

The transportation sector has been lagging the broader market for the better part of the past year and a half. But truckers enjoyed a resurgence this year until mid-April, when the entire group suddenly slammed on the brakes.  While not technically a trucking stock, Ryder System (NYSE: R), which provides truck rentals, fleet management and other transportation services, just suffered a breakdown and looks ready to follow its cousins lower.  Ryder started 2016 off strong, retracing almost 50% of last year’s sharp decline, running from a January low just above $45 to an April high just below $72. A nearly… Read More

The transportation sector has been lagging the broader market for the better part of the past year and a half. But truckers enjoyed a resurgence this year until mid-April, when the entire group suddenly slammed on the brakes.  While not technically a trucking stock, Ryder System (NYSE: R), which provides truck rentals, fleet management and other transportation services, just suffered a breakdown and looks ready to follow its cousins lower.  Ryder started 2016 off strong, retracing almost 50% of last year’s sharp decline, running from a January low just above $45 to an April high just below $72. A nearly 60% gain in less than three months handily beat the market’s 16% advance during that time.  Unfortunately, last week, the stock moved below the very solid trendline that had been guiding prices higher.   For anyone watching closely, this breakdown was telegraphed by the technicals. #-ad_banner-# Momentum indicators such as Moving Average Convergence/Divergence (MACD) scored a bearish divergence and a downside crossover.  The price highs made in April and May, while not exactly the same, were close enough to… Read More