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Bob Palmerton
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Mr. Palmerton is the founder of Baseline Analytics TrendFlex, a market trend-following system incorporating high-probability trend change signals. Robert is a Registered Investment Advisor. He is co-founder and advisor to The Absolute Return, LLC, which manages a family of absolute return... More
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  • Oil Is A Big Deal

    On Friday, I attended an Economic Update presented by Jeff Korzenik of Fifth Third Private Bank. In his talk, Jeff presented "Five Things to Know" about the 2015 U.S. Economy.

    Two main points Jeff raised was "how oil is a big deal." Typically, in the face of declining oil prices, the oil services sector is the first and quickest to adjust behavior to mitigate the impact of lower prices. Taking rigs offline, reducing capital investment, and layoffs are typical actions.

    We have seen the rig count decline from 1527 to 679 compared to this time last year. As for oil industry capital expenditures, Goldman Sachs' David Kostin noted CAPEX cuts from between 25% and 33% announced from a few of the major integrated producers.

    The first of Jeff's two main points addresses personal consumption. Jeff Korzenik noted that consumers are much slower to adapt to a change in gasoline prices, as opposed to the swift measures the oil companies take. Personal consumption increase as a result of lower pump prices has not manifested itself in higher personal expenditures in any noticeable way. Eventually, as Jeff noted, it does have an impact and tends to support an increase in discretionary expenditures. We should look for that pop in spending this summer.

    The other main point Jeff raised was the opportunity in LNG (Liquefied Natural Gas). The U.S. has an abundance of natural gas; recently priced around $2.50. Japan pays $15 to import LNG, and is especially interested in importing more, as a replacement for restarting (and further expanding) its nuclear energy infrastructure. U.S. trade policy restricts sales of LNG to Japan, however, current discussions on Capitol Hill are addressing the reduction in trade restrictions to Japan (and other countries) to expand U.S. exports to help reduce our oversupply of natural gas.

    Recently, the Motley Fool shared this presentation on Slideshare, addressing megatrends in the energy industry.

    May 02 2:07 PM | Link | Comment!
  • New Month, New Dividends

    Each month, Baseline Analytics scans equities and ETF's to identify dividend-payers with favorable technical characteristics. It's time to scope through the crowd of dividend-paying stocks for the month of April.

    We ran several key technical scans and arrived at a few lists of timely investments. These lists are captured in our "Wrapper" reports and presented to subscribers. As a preview to April's dividend-payers, here are a few standouts.

    Bullish Trend Wrapper. Of the 217 stocks and ETF's in our screen, 119 made the cut for trading above their 200-day moving average. We honed the list further to 40 that are trading 10% or higher than their 200-day moving average, representing the strongest stocks in the bunch.

    One standout is Darden Restaurants (NYSE:DRI). Darden sports a PE of 13, a yield of 3.2%, and increasing earnings estimates.

    MACD Buy Signal Wrapper. MACD stands for "Moving Average Convergence Divergence" and is a popular technical indicator developed by Gerald Appel. Fewer picks here, as 12 made the cut and those were sliced to 7 picks (we dropped 5 that were stuck in a bearish trend).

    Hormel Foods is a standout here. Hormel (NYSE:HRL) has a 1.8% yield and raised its full year earnings guidance in February.

    Volume Surge Wrapper. This is our most popular wrapper, utilized in several Baseline Analytics ETF and stock scans. We seek out stocks that are trading impressively above their moving average of volume. This could be the most recent 5-day trading volume as compared to a stock's 50-day and 200-day average trading volume, for example, suggesting professional buying.

    A standout on this wrapper list is Shoe Carnival (NASDAQ:SCVL). On March 20, Shoe Carnival broke out of a trading range in the mid-20's on high volume, recently closing at 29. Its most recent 5-day average daily volume was 46% above its 50-day average trading volume.

    You'll need a subscription to access the complete set of Baseline Analytics Wrapper Reports for April. Access our TrendFlex Score and ETF Signals, StockStash and ETFZone trading and investments ideas, through our Monthly, Quarterly or Annual subscription plans. You get the full set of Premium Services offered on Baseline Analytics, at one low price.

    Wait no longer, click here to subscribe.

    Tags: DRI, HRL, SCVL
    Mar 31 1:01 PM | Link | Comment!
  • A Breadth Of Fresh Highs

    Baseline Analytics TrendFlex Score includes several market indicators focused on internal market strength. These breadth indicators exhibited rather lofty jolts on Friday 3/20, hitting extremes that not only reinforce the strength of equities, but that potentially point to some frothiness in the "risk-on" trade. The charts below depicts several measure of market breadth (all of which are variably-weighted components in the TrendFlex Score).

    (click to enlarge)

    The chart above is the NYSE Advance-Decline indicator. Note the strong uptrend maintained above its moving average, pushing to meet up with its high from the beginning of March. No internal weakness here. As I was seeking published commentary on the NYSE Advance-Decline, I found a rather noteworthy analysis from Greg Schnell, particularly interesting for its chart of the 6-year cycle of the S&P 500. That cycle, which plots a market low in the mid-2015 timeframe, was drawn back in December 2013, and markets have admittedly behaved a bit more bullishly since. Also note Greg's reference to the "80/90's period where we stay nice and strong." Something to keep in mind today.

    The next chart is the High-Low Percent of the S&P 500. This breadth indicator measures the percent of new highs of the S&P 500. It is based on a percent of net new highs (number of new highs minus number of new lows) divided by the total number (500) of stocks in the S&P 500. In all of these charts we plot the 63-day exponential moving average, essentially a three month average of the indicator. The $SPXHLP (which is a 5-day average to smooth out the variability), is reaching toward 12% (its recent high was at 14% prior to the market heights reached at the start of March). A bearish reading of this breadth indicator is below 0 (a number of market technicians view -2 and lower as a truly cautious level for bulls).

    (click to enlarge)

    Our final breadth chart is the NYSE Advance-Decline Volume line. This breadth indicator is based on Net Advancing Volume, which is the volume of advancing stocks less the volume of declining stocks. So higher-volume stocks (i.e. Walmart) have a heavier weighting in this calculation, which basically favors the large-cap stocks (the Advance-Decline line in the first chart above favors small to mid-cap stocks). Click here for a primer on AD and AD Volume indicators by Arthur Hill.

    (click to enlarge)

    We look to market breadth for signals that the uptrend is losing steam. As fewer stocks participate in a market rally, breadth will begin to flatten and decline. Note the chart presented by Greg Morris below. The Nasdaq Composite reached a new high in November 2007, while breadth peaked in March 2007.

    (click to enlarge)

    Looking at today's chart of the Nasdaq and its A-D Line (below), it appears that 2015 is moving in the right direction, but the trend in the A-D line prior to February 2015 is a bit non-committal.

    (click to enlarge)

    We'll watch this one carefully to assess any continued divergence, as these market breadth indicators remain invaluable to gauging the internal strength of equities.

    Our TrendFlex Score includes four measures of market breadth. Subscribers receive an update on the TrendFlex Score each week, as it measures the risk of a change in the market trend.

    Mar 21 1:04 PM | Link | Comment!
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