The Wrap 3/5/12




The S&P missed touching the 20 day moving average by about buck today. It almost hit the level, then managed a bounce, but closed right below the 10 day moving average. Basically another choppy day.

What we are seeing though is sector rotation. The same money is moving around, but entering and exiting different sectors. Right now, coal and steel are getting demolished, and  fertilizer stocks, which were on fire since January, are now getting hit. Stocks like MOS, POT, AGU and CF are getting sold now.

Semiconductors are breaking down and we are short NVLS. For now, the semiconductor group looks like it topped out about a week ago. It’s hard to tell if they go much lower, or if this is just a mild pullback. The 50 day moving average support for SMH (the semiconductor ETF) is close by.

Energy (XLE) has broken the 10 and 20 day support, but the volume has been tepid and it did recover today off the lows today. The materials sector (XLB) has been hanging in there just fine so far and found support today at its 50 day moving average.

The financials (XLF) are at significant price and moving average on the weekly chart, but have the feel that they want to go higher.


What could upset the apple cart is any further strength in the dollar. In the chart below, you can see the dollar has bounced off support and it is close to breaking the downtrend line to the upside. It will be interesting to see what the dollar does when it tags resistance at around 79.80 level.

U.S. Dollar
U.S. Dollar

A few stock triggered today. NVLS, MAN, STMP and NSC.  A couple of names like DE and CAT gapped down through the triggers, so I didn’t trigger them.  For now, I am waiting to see if they bounce and I will email you what I am doing tomorrow, once I see how they trade. I took CAT off the list, not because I don’t like it, but its a duplication of effort with DE. I will be happy to keep anyone posted on CAT, as I know some of you bought  bought puts.

For now there are some nice looking longs as well as some shorts and I’m keeping everything on a tight leash this month. I would like a bigger pullback to get really long, but they may just keep this a “sector rotation” type market. Unfortunately, the market doesn’t care what I would “like”.

Let’s watch those sectors rotate, because we may not get that big correction. Hope you had a good day and I will see you in the morning.





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