With such a pleasant bounce in the markets — or melt-up as I have seen it described, it may seem superfluous to examine where the action has been coming from. This is how the Stocktwits 50 and IBD 50 lists did this week, in addition to some 10-stock lists derived from them using random selection and some of Vectorvest’s filters.
“T10″ means the top ten issues in the watchlist as ranked by the publisher of the list. VST indicates a ten-stock watchlist compiled by filtering the base watchlist by Vectorvest’s VST proprietary indicator, RT its proprietary Relative Timing indicator. Rand indicates a ten-stock watchlist compiled from a random selection. There was no random selection drawn from the Stocktwits 50 this week as the list was only 25 issues.
Momentum stocks, which is as good a name as I can think of for the ST50 and IBD50 constituents have not been leaders either in this rally or collectively since earlyAugust when I started keeping score in this experiment. In fact, both the ST50 and IBD50 lag the average and compounded weekly performance of “the market” which I calculated as the average weekly performance of the S&P500 and the NASDAQ composite. That goes for the filtered watchlists too, by the way. I have compiled a randomly selected list from the IBD50 for four weeks. In each of those four weeks the random list has outperformed the proprietary filtered lists. The proprietary lists haven’t outperformed the as-published lists either. On average over ten weeks the Top-1o selections from the Stocktwits50 and the IBD50 have underperformed the list performance as a whole based on average or compounded weekly returns. So much for stock picking, then. That may be a bit harsh given the difficult market conditions we’ve experienced, but for now, if you can’t afford to buy the whole 50-stock list a randomly-selected proxy does not look like exactly the worst way to go.
On to sectors. This last week technology, energy and materials have provided the best performance. I typically like to follow sectors using Vanguard ETFs as they are a less-expensive alternative. This is the graphic I have set up in TC2000 where I can compare the different sector ETFs, select a time period to sort and calculate performance. The results are automatically added to the watchlist column. Past results may not indicate the future but I have found this a good way to see what sectors are hot. I also use the same approach for market segments which is what is illustrated below:
The portfolios did better this week, although when I updated the IntersectioNx and Stocktwits Top10 portfolios midweek, we would have been better at that point sticking with the week earlier selections.
- IntersectioNx portfolio: Last week $96,850, -3.15%. This week $99,614, -0.39%
- Stocktwits Top 10: Last week $99,216, -0.78%, This week $102,703, +2.7%
- IBD Top 10: Last week $47,183 -5.63%, This week $52,409 +4.82%. Now that’s a reversal. This is the monthly portfolio which will be refreshed this weekend.
OK, our benchmarks have the following results this week (Friday to Friday):
- S&P 500: +4.74%%
- NASDAQ Composite: +5.89%
- Wilshire 5000: +4.86%
- Russell 2000: +6.15% Nice. The NASDAQ 100 was up 6.07% too.
So, one has to wonder. Have we seen a bottom or is this still just a bounce?
Our watchlists performed as follows, Friday to Friday:
- IntersectioNx: +3.06%. RGLD +6.9%, HANS +6.44% 6W 0L
- IBD50: +5,58%. ACTG +17.25%, CERN +16.34%. Best watchlist this week.
- IBD50 Top 10: +4.9%. HLF +8.85%, MA +8.39%
- ST50: +4.16%. STAA +18.7%, MG +12.18%
- ST50 Top-10: +3.43%. RGR +10.37%, CF +9.43%
So, the IBD big list has it again for this week. I think the main take home is the reversal from two weeks ago. Last week we saw losses in these watchlists from 6% to nearly 11%. This week all the green with reversal percentages from 10% to 16%. Not sure this is a full reversal but with strong money management there may some some dollar to made (or lost). I’d still say caution is warranted, personally.
While the man on the right in this picture had everyone’s attention Friday, and whose at least not negative comments may give a temporary lift to our domestic markets the man on the left — ECB President Jean-Claude Trichet — still has a lot of influence over what will happen to our markets. This weekend, IMF Head Christine Lagarde made less sanguine comments on the Global economy and called for additional capitalization of European banks. Coupled with renewed grumbling from the ungrateful Greeks makes me think that perhaps the ability of Europe to roil our markets is not yet done. And when the head of the IMF can’t afford a car, you know things are bad!
Nothing in this post should be construed as a recommendation or solicitation to purchase securities. It is for information and entertainment only.
The Paladin Money Intersection 50 is a list of those stocks that appear on BOTH the Stocktwits50 and the Investors Business Daily 50. The thinking is, do we get the best of the best? Well, I don’t know about that but both base lists are strong so the Intersection list should be a pretty powerful watchlist. The list has ten component stocks this week and had three winners. The list lost about 2.7% for the week.
About the only stock on the list that did so well or badly as to be worthy of comment is Cliffs, which was the only stock with a double-digit gain or loss percentage. Let’s take a look at the chart (click for full-size):
The rot had already set in by the time CLF reported quarterly results on Wednesday night. The market’s reaction to a 52% increase in revenues and a 69% increase in operating income, which pushed CLF below its 50-day SMA is something to behold. One has to wonder if there isn’t a case for putting CLF on watchlist. A major raw material miner who can produce and sell product while the dollar continues to weaken may be worth keeping an eye on.
On another topic, just about all the graphics I use in Paladin Money come from Worden Bros. I ditched Metastock to buy TC2000 (with my own money, I might add) and have been very pleased. V12 of TC2000 came out this week and it is very sweet. I strongly suggest you click on the left link and check it out. Even if you decide TC2000 isn’t for you, and there are many other fine products, the Worden site has a lot of free educational resources that you might find profitable. If I get a chance in the next week or two, I will give you a closer look at V12 of TC2000 and how I use it to identify profitable moves.
On a day the Dow was up over 150 points, these are interesting numbers:
- IBD50 -1.1%, 24W, 25L, 1Even Lots of red ink, TZOO -34.66%!!
- IBD50 top 10 -0.35%, 4W, 5L, 1Even
- Intersection50 -1.02%, 4W,8L,1Even
- Stocktwits 50 +0.38% 29W, 20L, 1Even
- Stocktwits50 top 10 +1.16%, 7W,2L,1Even
- S&P500 +1.35%
- W5000 + 1.26^
- NASDAQ Comp 0.72%
- NASDAQ 100 0.69%
- DJIA 1.21%
Notably, although the NASDAQ lags the other indices it is interesting that our leader watchlists were quite disappointing today. The Stocktwits50 about held its own, which compared to the IBD50 is an outstanding performance.Tomorrow’s IBD is quite silent in “The Big Picture” about what is going on versus what happened. Seeing that those stocks that have come up a bit short have been punished — RVBD, TZOO, and that TSCO which raised guidance for the year but was short for the Q due to weather also took one right between the legs, I am wondering if perhaps folks aren’t thinking their expectations are a bit elevated and these higher-flying issues are adjusting. Unless this outlook reverses I am looking to closing positions or very tight stops on my selections from the Intersection list. Even stops may not help if an after hours earnings shortfall is the cause of one’s woe.
My notional IBD50 top-10 portfolio has decoupled from its recently consistent indicator, VectorVest’s market timing indicator (MTI). The MTI has established a firm positive reversal from its recent low on July 18th. Closing at 0.99 it did hit 1.00 intraday today, which VV uses to delineate an up from a down indicator. I think wewill this indicator and the general market continue to climb for a while longer.
This is our first post of additions to and deletions from the Stocktwits 50 this week:
Stocktwits makes life easier for readers than does IBD with its 50 as we are told which stocks were removed each week. Also useful is the consecutive weeks on list number. Don’t let the list of Ns fool you with the newbies, Stocktwits resets its counter when a stock leaves the list. I will add a rotation chart next week when we have more than one week’s data. As we follow the Stocktwits 50 I am alkso going to add a notional portfolio of the top 10, updated monthly, in the same way we follow an IBD50 portfolio.
Tomorrow, our Chinese Internet stock review, including the big 5. Also, a commentary on Vectorvest confirmed calls.
This is the first time we have set up what we call our Intersection watchlist as a separate post. I may set it up as a stand-alone page soon.
For those who are not familiar with it, our Intersection Watchlist, or the Intersection 50 are those stocks appearing on both the Investors’ Business Daily 50 AND the Stocktwits 50. These two leading weekly watchlists are otherwise different, but stocks selected by both methodologies should be worth taking a look.
This is this week’s list, sorted alphabetically by symbol:
There are lots of stocks to like here. My personal inclination is start with the most highly-rated groups. About the only one of the A+ rated group (by IBD) stocks I don’t like is ULTA which needs new lipstick. If I had to pick one of the A+ group it would be JAZZ, which I picked before I noticed it had the highest Stocktwits score of the group (really).
Jazz chart courtesy of TC2000: (click on chart for full size view)