- Egypt rights center raided, 2 Mubaraks acquitted
- New Mexico Supreme Court rules same-sex marriage constitutional
- Blame Bush: 5 years later, that’s still the mantra, pollsters find
- Dutch prostitutes demand same retirement benefits as soccer stars
- John McCain to Harry Reid: I’ll ‘kick the crap’ out of you
- Dogs that talk: Researchers seek $10K for ‘No More Woof’ technology
- 1,000 firefighters called to battle stubborn Big Sur wildfire
- Black Friday brouhaha: Millions of Target shoppers hit by credit card theft
- Britain orders airplane to rescue citizens from violent South Sudan
- Mega Millions winner emerges as Georgia mom, in ‘disbelief’
VERSACE: If market pauses or pulls back, refresh holdings
Question of the Day
In 1929, the Coca-Cola Co. used the slogan "The pause that refreshes" to advertise its flagship beverage. The idea was that drinking Coke would restore and provide fresh vigor. I bring that slogan up as it appears the overall stock market, which has had one of its best starts in more than 20 years, is heading for a pause, if not a pullback.
Thus far in 2012, the S&P 500 is up more than 7 percent, while the Nasdaq is up just shy of 12 percent and the Dow Jones industrial average is up less than half that.
The year-to-date moves in those indices have pushed the stock market back to levels from July 2011, which preceded the August fall-off. As a reminder, the market tested levels at or near that July 2011 high two other times last year, both of which turned out to be short-term peaks in the stock market. As one can imagine, the return to that level for a fourth time has many wondering if the 2011 pattern of test and fail will repeat or if there is sufficient strength to push through to a new high.
While I have and continue to use a fundamental perspective when looking at industries, companies and their respective stocks, every now and again it pays to widen that perspective and look from a technical perspective. Technical analysis is used by many investors, and it evaluates a security by analyzing statistics generated by market activity, such as past prices, volume and a number of other indicators.
Unlike fundamental analysis, which examines the drivers and competitive factors of an industry and companies to determine if the shares are undervalued, priced accordingly or overvalued, technical analysis uses charts and other tools to identify patterns that can suggest future activity.
As I have written here the last few weeks, we have received several indications that the domestic manufacturing economy has improved. Even while some have tried to paint the January employment report last week as favorable - which boggles my mind considering the 1.2 million people who left the workforce during the month - the expectations are for the sluggish recovery to continue. Even the Federal Reserve's forecast calls for the U.S. economy to grow 2.2 percent to 2.7 percent, which is below the 2011 final quarter's growth rate. Reading between the lines, while we will grow faster than we did at the start of last year, 2012 in full will resemble 2011 in terms of overall economic growth.
Slow growth is better than no growth or another contraction, but there are a number of industrial companies whose stock prices are overbought on a technical basis and likely pricing in the hope for a stronger recovery than might occur. Those companies include Cummins Inc., Caterpillar Inc., E.I. du Pont de Nemours and Co. and Dover Corp., each of which has moved solidly higher over the last several trading sessions. Casting a wider net, the same can be said for the shares of Parker-Hannfin Corp., Ingersoll Rand PLC, Fastenal Co. and Pall Corp. Industrials are not the only types of companies falling into that overbought category; there are a number of retail and technology companies as well, including Coach Inc., J.C. Penney Co., Apple Inc. and Netflix Inc.
If I am right and the market retraces some of its gains, investors should treat it as a pause to refresh their holdings. By that, I mean that investors should revisit those companies whose fundamentals remain strong and capitalize on any pullback to get in at better levels.
Next week, we'll be back to a more rapid pace of economic data, including the latest on retail sales, the manufacturing economy and inflation. Stay tuned.
• Chris Versace, the Thematic Investor, is director of research at Think 20/20, an independent equity-research and corporate-access firm in the Washington area. He can be reached at email@example.com. Follow him on Twitter @ChrisJVersace. At the time of publication, Mr. Versace had no positions in companies mentioned; however, positions can change.
About the Author
Chris Versace, the “Thematic Investor,” is the director of research at Think 20/20, an independent equity research and corporate access firm located in the Washington, D.C. area. Before Think 20/20, Mr. Versace was the portfolio manager of Agile Capital Management (ACM), a thematically driven alternative investment fund. The groundwork for ACM was laid during Mr. Versace’s tenure as senior vice president of equity ...
By Michael P. Orsi
Edward Snowden should declare his patriotism in court
- Citing 'unfair system,' Obama commutes sentences for 8 crack offenders
- Gov't wasted $30 billion on 'pillownauts,' crystal goblets -- buying human urine!
- Homeland Security helps smuggle illegal immigrant children into the U.S.
- Bill Gates: The Secret Santa disguised as a 'friendly fellow' on Reddit
- Obamacare 'pajamas boy' gets roundly mocked
- BOLTON: Nero in the White House
- Armed response, not restrictive gun laws, brought swift end to school shooting
- Duck Dynasty Phil Robertson suspended indefinitely for gay quip
- OBAMASCARE: Huge premium hikes rock employer-insured workers
- UHLER and FERRARA: Obamacare, the end of the progressive era
Independent voices from the The Washington Times Communities
Southern Fried Politics from the Lens of a Persian-American Millennial
All of the world’s problems, solved on your back porch
Top 10 handguns in the U.S.
Extraordinary day at Redskins Park
White House pets gone wild!
Let it snow