Courtesy of Scott Martindale, Sabrient Systems and Gradient Analytics
Stocks are maintaining their bullish sentiment for the New Year. The proverbial “wall of worry” remains high and intimidating, but bulls traditionally prefer it this way. It makes the less optimistic investors keep a store of cash, and it makes the bears pump money into short positions–both of which can provide fresh fuel for stocks when idle cash gets put to work and the bears start covering their shorts. When everyone is already on the bullish bandwagon, there is no source of fresh investment capital to keep the uptrend intact.
This week through Wednesday, the leading sector iShares were Basic Materials (IYM) and Financial (IYF), followed closely by Industrial (IYJ), while the laggards have been Energy (IYE) and Utilities (IDU). For the market to continue higher, it is going to need strength in the Financials, and we are definitely seeing it. Strength in Materials was at least partly attributed to an upbeat earnings report from Alcoa (AA) to kick off another hopeful earnings season.
Interestingly, while IYE was hit with a -1.3% loss on Wednesday due to weaker energy prices, solar names were up big on analyst speculation about new opportunities. In fact, Trina Solar (TSL), JA Solar (JASO), and Jinko Solar (JKS) were each up over +30%! All of the solars display high Value scores in the Sabrient quant algorithms. JASO and GT Advanced Technologies (GTAT) also sport strong Growth scores.
Another possible reason for strength in U.S. stocks is weakness in Chinese equities, which has led to a flow of money from China and emerging markets into the relative safety of the U.S. Some analysts are even speculating that China might need to institute economic stimulus to get imports growing again, which would benefit sales growth of U.S. companies.
In case you missed it, Sabrient’s annual “Baker’s Dozen” Top 13 Stocks for 2012 were unveiled last week in a free live WebCast. Sabrient’s founder and chief market strategist David Brown was the main speaker, and Luke Rahbari of Stutland Volatility Group offered up his suggestions on how a trader might execute options trades on some of the names on the list. The video replay will be available for viewing any day now, but you can find the full list of 13 on the Sabrient web site:
http://www.sabrient.com/individuals/Bakers-Dozen-2012-Signup.html
SPY closed Wednesday at 129.20. Looking at…
