It’s January. Time to think about taking some profits?
Or at least to settle in for a period when U.S. stocks as a whole don’t go much of anywhere.
January ends the three month period that for more than 50 years has been on average the best part of the year for U.S. stocks, according to The Stock Traders Almanac. In his December 29 comments on StockCharts.com John Murphy notes that the 2009 rally looks very similar to the 2003 rally. Both began in March and ran strong through the end of the year. The 2003 rally peaked in the first quarter of 2004 and then corrected into the fall of 2004. As Murphy rightly notes, “There’s no guarantee of a repeat performance in 2010. But there is a lot of seasonal precedent for stock rallies to stall in the early months of a new year.”
As you’d expect from a month that ends the strongest three-month period for U.S. stocks, January often means an end to sector rallies.
Again according to The Stock Traders Almanac, gold and silver stocks, semiconductors, and telecom start to show seasonal weakness in December and then pull back in January. That, Murphy, notes, seems to be happening right now with gold and silver peaking at the start of December and semiconductor and telecom stocks starting to pull back from an overbought reading.
Other sectors that start to weaken during January, the Almanac says, are computers, Internet, and technology; healthcare providers; and utilities.
The only sector in the U.S. stock market that typically gets stronger in December is energy. That sector, Murphy’s charts show, moved above its 50-day moving average just before Christmas.
Doydum,
Thanks for the info. Very interesting. How much control does the US have to control this loop-hole? Any guesses to whether the government with use the carrot or stick method to keep companies from dodging taxes?
Market_dogma
EdMcGon,
As far as pharma is concerned, I only have TPI. They have many drugs already released and they have many in the pipeline ready to be released. All the numbers look really good and on top of that there is a decent dividend from the cash they are making. I looked at various others and TPI seemed like the best pick to me.
I am interested in the commodities here in China. With the growth shortages are common. I like CHNG. This winter will be a cold one here in China and there already has been shortages of natural gas. Also, China is still about coal. it isn’t going away anytime soon check out LLFH.
Department stores are still not as common in many cities. This market has room to grow. I think Golden Eagle could be a good play here, GDNEF.
One last comment, Insurance and investment services is still a young market. Most of my local friends only have what their workplace offers for insurance. Also, only upper class are presently using investment services. As their economy grows and the 50% savings rate reduces. I would expect life insurance policies and other investment vehicles to pick up steam. Jubak mentioned in one of his past articles PNGAY and there is LFC, both for insurance. Also, CISG is another pick. I have all three of these on my watch list. These would be long term plays. I might pick up CISG this year. It is in the tier 1 (big cities)market already.
Correction: Appearently Halliburton has moved its HQs back to Houston, TX. Last time I checked they were in Dubai. But, here is something for you to chew on:
http://www.hrworld.com/features/10-overseas-companies-060408/
Amtrend10… You say they are ‘based in the US.’ Yes, they are ‘based in America.’ But you do not call them ‘American companies.’ These multinationals employ American executives and secretaries in their HQs and that’s about it. They have all their engineers and workers abroad. For God’s sake, they don’t even repatriate their profits for fear of being taxed. And some of them, they are not American even on paper like Tyco or keep their HQs in the US, like Halliburton. Oh well…
Doydum..I will agree that US production has changed but not for the reasons you sited. The evolving world economy is dictating to ALL of the participating economies and if you refuse to recognize the affect of a growing powerhouses in the world then you are certainly not qualified to give your long winded opinion. Keep your head in the sand. The strongest companies in the world still are based in the US.
dkchinabiker,
Thanks for the tips! I’m always on the lookout for good Chinese stocks. Along that line, what is your opinion of the Chinese pharma companies? I keep finding companies in that area which appear undervalued based on nearly every measurable criteria (i.e. p/e, peg, growth, assets/liabilities, net profits, etc.).
I am a Texan who has lived in China for the past two years. I hope to stay here working and making money for a long time.
Some of us investers, like me, missed the Chinese growth when many business opportunities happened, but the new growth in China is the domestic growth of the consumer.
I think the new focus for investment in China has to be with Chinese domestic companies which are increasing market share for the new consumers. Some of these have seen very good growth such as CTRP. I would look for companies such as CPBY, NEP, TPI. These companies are Chinese domestic companies listed in the US which have a lot of growth potential.
Reminds me of an old movie Risky Business! Sometimes you just have to say……
@ andante
if you are thinking of investing in a solar stock, TSL is the cream of the crop. Much greater earnings power than Suntech and much more centralized operations than Sunpower.
Jim,
If energy is crossing its fifty day moving average and getting stronger, am I wrong to include alternative energy in this picture? In past columns you have recommended Sun Power (SPWRA). In recent news they have had accounting problems and are having an internal investigation which is not yet completed. A class action lawsuit is pending that alleges securities fraud because of unsubstantiated accounting entries overstating the companies financial results for 2009. Daniel Shugar, systems unit president, left the company and will not return. It is not known if his departure is related to the accounting errors. His loss could be important because he worked in the utility industry for PG&E prior to working at SPWRA and SPWRA has a large scale solar farm project plan with PG&E. He was to lead the California Solar Valley Ranch in San Luis Obispo, a 210MW facility. The environmental impact report is not completed yet for this and there is local opposition to the project. Thus permitting is not completed and impact mitigation has not been done. FSLR has a 500 MW farm planned for the same region but California has a reputation for having a powerful environmental lobby and permitting is difficult. Personally, I’m not sure what environmental sense it makes to fight against solar power when the alternatives are fossil fuels and nuclear waste. In any event, considering the above developments do you still think SPWRA would be good to invest in at this point to take advantage of the upswing in energy or would something like STP that is going to open a US stateside assembly plant be better? Or YGE or TSL?
3Q’s – Back to doydum – I think of the 3Q’s, Q2 is a known. China will not let growth drop below 8% no matter what. 8% GDP limits the downside, however, I think the question is the means by which they force a GDP of 8%. If their invested capital is converted into something of true economic value that will help stabilize a very fragile global economy. But that hasn’t been the case inside China for the last 10 years, meaning scarce capital has been wasted in unproductive infrastructure, excess capacity to make nearly everything…the list goes on and on.
Hi, Jim:
Good to hear from you again.
I sold bunch of stocks year end including BRF and 2 other S. America stocks. All went down after I sold, except the 3 S. American stocks. They just kept going up. But still appreciate the gains. Without Jim’s recommendation, I would not have discovered these S. American stocks. Wish 2010 be another good year for all Jim’s readers.
Per your comment: “Again according to The Stock Traders Almanac, gold and silver stocks, semiconductors, and telecom start to show seasonal weakness in December and then pull back in January”
What about TSM….perhaps take some of the ~14+% gain and wait for the pullback??
I’m the same as Terryw (re: BRF).
welcome back!
Sometimes I feel bad for selling BRF, I’d love for an opportunity to buy in again at a dip.
On Dec 29, in an MSN video, Jim asked ‘3 tough questions’ to all those who intend to invest in 2010.
http://articles.moneycentral.msn.com/Commentary/Experts/Jubak/jim-jubak-video-ap.aspx?cp-documentid=9f0e7867-ad67-4a39-ac00-37922cc7036d%26tab=MoneyShow.com
Q1. When will the Fed start raising interest rates?
Q2. Will China’s growth slow down?
Q3. Will America’s growth pick up?
Jim’s first post in 2010 turned out to be a technical prognostication of the month of January. I would like to stick with the fundamentals of 2010.
In my opinion, there are actually only 2 ‘tough’ questions here, Q2 and Q3, because the answer to Q1 is a corollary to the answers to Q2 and Q3. So, the questions boil down to ‘will American growth accelerate?’ and ‘will Chinese growth decelerate?’
Will American growth accelerate?
I think the American growth will stay the anemic same. Obama and the Democrats will not let the economy slip into the negative territory. This is an election year and they are already talking about the next stimulus package. The Republicans are hypocritically ranting as if they would do otherwise. The American growth cannot pickup either. Hundreds of books were written on this subject during the last 30 years: Destruction of the heavy industries in the 70-80s, downsizing in the 90s, outsourcing of the 2000s… There is no manufacturing and no well paying jobs left in this country anymore. There was briefly IT in the 1990s (INTC and MSFT) but they too outsource now. Add to that the fact that the aging population, thru the roof healthcare costs, the non-existent banking system… So, what sort of growth do we expect, if we get to grow again? We are in a state of ‘new normal’ in Pimco’s El-Erian’s words. How about calling it ‘muddle through economics?’
Will Chinese growth decelerate?
I don’t know much about China’s growth. All I know is, well, they grow. They have mistakes. They have bubbles. I think they will let the Renminbi appreciate a little bit. I think they will slow down a little bit. Maybe not. But this is really not that important for us, Americans. What is really important is they will manage to grow (as before) and in the end start really pressuring commodity prices.
Will the Fed raise interest rates?
I think we can now answer Jim’s Q1. Fed will not raise interest rates because, first, they will not need to, second, they will not dare. So, with all that stimulus money pumped into the economy, are we going to see any inflation? I don’t think so. Look at Japan, they are pumping during the last 20 years and they still are talking about deflation. With all that budget deficit and government debt, is this going to be the end of the world for America? I don’t think so. Compared to the size of the American economy, we still have room to absorb more debt. Our treasury also knows that and they are increasing the maturity of the debt issued from 10 to 20-30 years. (So, they are basically postponing the day of reckoning to our children.) But this doesn’t mean there won’t be any inflation in this country. This inflation will not be because the economy is getting hot or the Fed is printing too much money. It will be because China’s growth will pressure the
commodity prices. Just like OPEC jacked up the price of the oil in the 70s and that sent the prices of everything soaring. What I mean is stagflation.
In short, we have nothing to worry about. More of the same, more of the same…
We all know the economy is one thing and the stock market is another. Under the economic conditions I outline above, it is obvious that the market will get manic-depressive through out the year(s). (Check out the 70’s charts.) This will create good opportunities for those who are agile and or keep some of their powder dry.
Is that the siren call of emerging markets I hear?