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Wednesday, August 23, 2006

Energy

Not much changed overnight in terms of my short- and long-term market models. Over the last week, the Dow Jones Industrial Averages breadth, volume and stochastic analysis are signaling “neutrality.” The NYSE Advance / Decline line is weakening, as is the S&P 500 On-Balance Volume Percentage. The DJIA MACD and 9-Day MACD still point to a “positive” stance, but its relative strength is weakening. Needless to say I’m looking at a mixed bag of technical indicators to say the least as I’m sure most of you are too.

My long-term market model is now coming to the end of its four-month bearish journey. Since the model went negative on April 25th, the NASDAQ and Russell 2000 have declined by over 7% while the NYSE, S&P 500 and Dow Jones Industrial Average have fluctuated but remain relatively un-changed. It’s been a tough few months for investors not only in terms of range-bound markets, but also inflation and geo-political worries. I certainly hope the last four months of 2006 are a little easier to navigate.

In terms of alpha generating investments, I’m afraid not much has changed overnight either. I’m still seeing opportunity developing within the NYSE 100 (NYC), S&P 100 (OEF), S&P 500 (IVV) and the Dow Jones U.S. Total Market (IYY). The remaining ten major markets I analyze are all rated “neutral.” Large Cap Value (JKF) is the only “buy” recommended style-box investment of the nine analyzed. Again, the remaining eight are all rated “neutral.”

Ten sectors are currently “buy” recommended including: Energy (IYE), Natural Resources (IGE), Real Estate (IYR), Utilities (IDU), Software (IGV), Technology (IYW), Semiconductor (IGW), Telecommunication (IYZ), Healthcare (IYH) and Non-Cyclical (IYK). Seven sectors are “neutral” recommended while Transports (IYT) retains the “sell” recommendation that took place over a month ago.

There are over thirty Energy related stocks, funds and ETF’s which are recommended “buys” this morning. Two of the higher rated stocks are Marathon Oil Corp. (MRO) and Veritas DGC Inc. (VTS) which is an interesting company that focuses on “geophysical” information such as maps and other data that companies use to find oil and natural gas. VTS was last upgraded to a recommended “buy” in late-July. In terms of funds and ETF’s, investors still looking for an energy option should look at iShares S&P Global Energy (IXC), Fidelity Select Energy Portfolio (FSENX), ProFunds Oil & Gas (ENPIX) and Rydex Energy (RYEIX) funds.

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