• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Doug Kass
    • Bruce Kamich
    • Jim Cramer
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing

The Trader Daily

The miners are untouchable.
By BOB BYRNE Oct 08, 2014 | 07:30 AM EDT
Stocks quotes in this article: AGN, BDX, ACT, FCG, XOP, XME, GDX, QEP, APA, XLI, LUV, DAL, UNP, NSC, FLR, PNR, ETN, FLS, DIA, TLT

As long as you were positioned in a few select healthcare stocks, Tuesday was a pretty good day. Names like Allergan (AGN), Becton Dickinson (BDX) and Actavis (ACT) did a decent job of maintaining and building on recent gains. Unfortunately, if you were positioned long in nearly anything other than these names, you probably didn't have a banner day.

As far as specific sectors are concerned, the most aggressive and unrelenting selling continues to be seen in the First Trust ISE- Revere Natural Gas ETF (FCG), SPDR S&P Oil & Gas Exploration & Production ETF (XOP), SPDR S&P Metals and Mining ETF (XME) and Market Vectors Gold Miners ETF (GDX). An easier way to think about this would be to view any company that extracts any type of natural resource from the ground as untouchable.

The selling in gold and silver miners, as well as offshore drillers, isn't a new phenomenon. But I wonder how many traders realize stocks like QEP Resources (QEP), Newfield Exploration (NFX) and Apache (APA) have been absolutely crushed over the past few weeks. These are all names that were trading at or near two-year highs roughly a month ago. Coincidentally, QEP, APA and NFX are three of the highest weighted components of the FCG.

As an aside, I should mention each of the three aforementioned energy stocks are on my short list for bounce candidates once the sector-wide selling begins to ease. Newfield is of particular interest to me on the long side, perhaps against a stop-loss of roughly $30-$32. We'll likely revisit these names and review their charts in the not too distant future.

Away from energy and mining, another big focus for me has been the Industrial Select Sector SPDR ETF (XLI). The approximately flat year-to-date performance of the XLI fails to tell the whole story. If you restrict your view to industrials focused on the aerospace/defense, railroading, waste management or airlines, things don't look all that bad. However, if you dig deeper and review the industrials focused on industrial equipment, farm and construction machinery and diversified machinery, you'll find some pretty stunning year-to-date loses.  

To make things clearer, stocks like Southwest Airlines (LUV), Delta (DAL), Union Pacific (UNP) and Norfolk Southern (NSC) are up between 18% and 71% year-to-date. On the flip side, you've got names like Fluor (FLR), Pentair (PNR), Eaton (ETN) and Flowserve (FLS) trading lower by between 15% and 20%.

I hesitate to suggest anyone should proceed with caution if holding over-weighted long positions in the strongest sub-sectors of the major industrials (airlines, rails, etc). However, given that we frequently see the strongest components (and sectors) taken out back and shot before broad market corrections come to an end, I would indeed proceed with extreme caution.

From an index point of view, it remains relatively easy to point to the 20-day and 50-day simple moving average, along with the Relative Strength Index (RSI) and state unequivocally that there's little reason to be leaning aggressively bullish. As we saw in Tuesday's Trader Daily, every major market ETF, include the SPDR Dow Jones Industrial Average (DIA) as of Tuesday's close, is closing beneath its respective 50-day moving average. Additionally, each ETF's RSI is trading convincingly beneath the 50-center line. Simply put, the intermediate timeframe trend remains bearish.

If we incorporate bonds into the picture, we continue to see weakness in high yield, especially when compared against higher duration.

Weekly High Yield versus 20+ Year Treasuries
Source: StockCharts.com
View Chart » View in New Window »

The chart above makes it all to clear how persistent the selling has been over the past ten months in riskier, higher-yielding bonds, in favor of safer, higher-duration bonds. What's concerning from an equity side, is that up until 2014, the S&P 500 moved in relatively close correlation to the JNK:TLT ratio. Put another way, when traders were unloading high-yield bonds, they were also selling stocks. And they weren't only selling small caps.

Additional Notes:

  1. Please check columnist conversation prior to Wednesday's open for an updated E-Mini S&P 500 Futures (Es) volume profile and trade plan.

Any trading or volume profile related questions can be posted in the comments section below, emailed to me at parkcityyeti@gmail.com or posted to my twitter feed @ByrneRWS.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Bob Byrne had no positions in any of the securities mentioned. 

TAGS: Investing | U.S. Equity | Stocks

More from Investing

Rotation Is No Reason to Turn Away from the Markets

James "Rev Shark" DePorre
Jan 21, 2021 4:45 PM EST

Bears may fuss over the routine consolidation combined with rotational action, but here's how I look at the moves.

Jim Cramer: Housing Is Our Bridge

Jim Cramer
Jan 21, 2021 3:59 PM EST

Do not fear the housing sales boom -- this is good news and I'll tell you why.

Cord-Cutting FuboTV and Advertising Platform PubMatic Are Not Buys Here

Bruce Kamich
Jan 21, 2021 2:59 PM EST

Our look at the stocks of both FUBO and PUBM.

Jim Cramer: You Just Won Powerball, Now What?

Jim Cramer
Jan 21, 2021 2:24 PM EST

Remember, you only need to get rich once.

Here's the Beast and Beauty of Investing in Disney Now

Bruce Kamich
Jan 21, 2021 1:54 PM EST

DIS might suffer a pullback in the next several weeks, but longer-term a rally is possible, according to the charts.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 11:16 AM EST CHRIS VERSACE

    Worst Stocks to Buy for the Biden Presidency

    Biden's take on the minimum wage, likely moves on ...
  • 08:35 AM EST GARY BERMAN

    Thursday Morning Fibocall for 1/21/2021

    SPX (Long-Term View) The 1/20/21 NEW high @ 3859...
  • 11:38 AM EST CHRIS VERSACE

    Best Stocks to Buy for the Biden Presidency

    President-elect Biden's massive stimulus plan, int...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2021 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login