The Basic Industries Sector Has Not Maintained QE Hype
All nine stocks are components of the Materials Select Sector SPDR Fund (XLB) , which ended September with a positive but overbought weekly chart profile while. XLB closed Wednesday above last week's low at $36.31, but a close this week below $36.58 shifts the weekly chart profile to negative.
Fundamentally www.ValuEngine.com shows the basic industries sector just 2.1% overvalued following benchmark revisions based upon new data for September. Nine of the remaining fifteen sectors are more overvalued.
Among the nine stocks I am covering today, five have buy ratings and four have hold ratings. Back on July 31 when I wrote Trading the Undervalued Basic Materials Sector the sector was 14.7% undervalued, and six of these nine stocks had buy ratings and three had hold ratings.
Chart Courtesy of Thomson/Reuters
The daily chart for XLB ($36.55) shown above spiked to a new 2012 high at $38.57, two days after the FOMC announced the third round of quantitative easing, and since then it has traded lower.
XLB is below its 21-day simple moving average at $37.09 and above its 50-day and 200-day SMAs at $36.20 and $35.81. My annual and monthly value levels are $35.72 and $34.78 with an annual pivot at $37.72 and weekly and quarterly risky levels at $38.24 and $39.78.
Back on Aug. 23, I wrote Gold Stocks Lag the Breakout in Gold Prices discussing how gold shares were lagging the precious metal. On Sept. 10, I updated this story in Gold Stocks Continue to Lag Gold and in both stories and in today's post I profiled Newmont Mining (NEM) .
On Aug. 23, Comex gold broke out above its 200-day simple moving average while NEM closed at $49.04, with its 200-day at $54.27. Then on Sept. 10, NEM closed at $51.36 with its 200-day at $53.26. The breakout for NEM came on Sept. 13 and on Sept. 21 trading as high as $57.93 for a gain of 18.1% since Aug. 23. Over the same time horizon gold gained 7.0%.
Reading the TableOV/UN Valued : The stocks with a red number are undervalued by this percentage. Those with a black number are overvalued by that percentage according to ValuEngine.
VE Rating : A "1-Engine" rating is a strong sell, a "2-Engine" rating is a sell, a "3-Engine" rating is a hold, a "4-Engine" rating is a buy and a "5-Engine" rating is a strong buy.
Last 12-Month Return (%) : Stocks with a red number declined by that percentage over the last 12 months. Stocks with a black number increased by that percentage.