Market Monitor

In Monday’s Goldman Guide we discussed the downtrodden healthcare sector of 2016. Now may be the time to look for a stock that bucks the trend. A little more than two years ago we featured TherapeuticsMD, Inc. (NYSE – TXMD - $7.66) at $6.20.

As we have opined a lot over the past few years, we are in the midst of one of the best times of the year for sports fans. Monday’s NCAA championship game could not have put a better cap on March Madness. Major League Baseball is now underway. The Kentucky Derby kicking off the horse racing Triple Crown is just over a month away. Finally, Master’s week is here, the first major of the season for golf, and what is considered the unofficial start of golf season for all of us weekend hacks.

Below is the two year chart for Callaway Golf Company (NYSE – ELY - $9.03) which illustrates that the stock is now above the 200-day EMA drawn on the chart. It can be observed that the stock has also had several head and shoulders patterns over this period making it a solid trading vehicle.

In Monday’s Guide we turned somewhat pessimistic on the markets. While we did not mean to play Chicken Little, there are some signs that point to a downturn and investors need to be cautious. Today we will turn to the positive. On the sports side, Major League Baseball starts next week, one reason to be upbeat. Additionally, on Tuesday the Conference Board’s index of consumer confidence rose to 96.2 upwardly revised from 94. Does this mean a spending spree in store for the economy? One American tradition is increased car buying in the spring. This is where we are going today.

Below is the one year chart for Fiat Chrysler Automobiles N.V. (NYSE – FCAU - $7.82). It can be seen that the stock is now trading above the 50-day EMA on what appears to be a new momentum run from a low in the middle of February.

In Monday’s Guide we addressed our winning formula of earnings plus window dressing equals opportunity and the fact that being a ‘half glass full’ trader/investor is the proper attitude to have right now. This commentary is in no way an effort to belittle what happened in Europe yesterday with another terrorist attack, but the fact that the U.S. markets traded essentially flat is yet another sign of positive trends. Our hearts are with the families and friends of the victims.

Also in the Guide we profiled a healthcare stock. Today, for the Market Monitor we will follow suit and go to our ‘go to’ with biotechnology. Below is the one year chart for Regulus Therapeutics, Inc. (NASDAQ – RGLS - $6.84) which illustrates the stock is on a solid momentum run since the middle of February and is approaching the 50-day EMA, in red.

We had a little more excitement yesterday in the presidential primaries as Ohio Governor John Kasich won his home state over Donald Trump. This was a must win for Kasich. It will remain to be seen if the victory can propel him in any way and stop the Trump train. March Madness also began with the four play-in games, also in Ohio. In Monday’s Goldman Guide we featured the West Coast regional bank stock BANC. Today for the Market Monitor we will keep the Ohio theme with another regional bank headquartered in Cleveland, coincidentally home of the GOP convention this summer.

The one year chart for KeyCorp (NYSE – KEY - $11.17) is illustrated below.

In Monday’s Goldman Guide we went with the political theme and discussed who would be better for stocks as President, Hillary or Donald? We mentioned there could be significant differences in both energy and healthcare based on what these candidates have opined about so far. Last night there was another set of primaries and the momentum continued for what appears to be the eventual nomination for both by the Democratic and Republican parties respectively. The question for us is where do we look for possible value with a bet on the winner?

One item we alluded to in the Guide was President Obama’s absolute hammering of the coal industry with executive orders and expansion of the power of the EPA in the name of global warming. Nothing will probably change if Ms. Clinton elected, but Mr. Trump has promised to reverse these policies and bring coal back.

Several coal companies have or are pending bankruptcies as part of the carnage that also has cost several thousands of jobs. A coal rebound could have a very positive impact as well on that front. Cliffs Natural Resources, Inc. (NYSE – CLF - $2.72) has been clobbered since the start of 2011 when it was about $100 and over the past five years as the chart below demonstrates.

Super Tuesday is now in the books and we appear to be closer to knowing who the nominees will be for both parties. For the Democrats, Hillary Clinton has faced a greater than expected fight from Bernie, but appears to be pulling away. If email-gate will prevent her from running or hurt her in the general election remains a major question. On the GOP side, The Donald appears to be running away with it, but has more work to do than Mrs. Clinton. Ironically, some of his fiercest opposition comes from within his own party. Why are we bringing up politics? Well, as we all know, the markets are no doubt affected by politics and understanding how Wall Street is forecasting the election will help us formulate some winning strategies. And the current uncertainty could be a cloud hanging over stocks as a result. But, we digress.

In Monday’s Goldman Guide we mentioned that technology appears to be an undervalued sector. Well, today’s pan is both a technology play and intricately weaved with the government. While out of our small cap space, we have featured Tesla Motors, Inc. (NASDAQ – TSLA - $186.35) periodically.

In Monday’s Goldman Guide we discussed our some EPS ‘crushers’. Certainly, right now we are looking for Companies that have a good track record in financial reporting for the all important metric combined with lofty forecast growth as well. Yesterday there was big news in the building and home products sector. Toll Brothers, Inc. (NYSE – TOL - $27.02) and The Home Depot, Inc. (NYSE – HD - $124.35) both clobbered expectations for revenue and were in line for EPS. We thought we would look for a ‘trickle down’ down stock in our small cap space.

Below is the one year chart for Quanex Building Products Corporation (NYSE – NX - $16.45) which illustrates a few head and shoulders patterns over that time and what looks like a buying trough dictated by the technical signal.

In Monday’s Goldman Guide we discussed our winning formula for small cap picks in this market. One of our key metrics is EPS growth and undervalued stocks from a P/E perspective. With Monday’s 2.27% jump in the NASDAQ, we decided to look into the tech sector, which is one of the top three in the small cap space.

Below is the six month plot for Nanometrics, Inc. (NASDAQ – NANO - $12.71) which illustrates a potential buying spot in what is roughly a trough in a technical head and shoulders pattern that started in October of last year.

In Monday’s Goldman Guide we discussed our belief that oil is reaching a bottom which means a positive signal for the economy and the markets. Certainly, the week has not started off great but we are sticking to our convictions. With that said we scoured our screeners and generated some themes related to a potential bear market and a downturn in the economy as our small cap “hedge”.

Below is the one-year chart for Kelly Services, Inc. (NASDAQ – KELYA - $16.68) which illustrates the stock is currently trading above the 50-day EMA of $15.89 and up nearly 13% since the second week of January while the major markets have all been in the midst of a major sell-off.