Industry Cycles
The age of the current cycle is around 50 calendar days, yet the behavior in the last two weeks has been one that resembles a cycle that is much older and coming to an end. Here is the current chart showing “cycle starts” grouped by date for all industries:
Couple of things that stand out to me:
If I treat an average cycle length as 80-90 days, a 50 day cycle would be one where I could consider the end to start now. Instead, the last two weeks saw 14 long positions get closed in my portfolio, and all the market movements resemble a cycle that’s much older than the usual “50 day cycle”.
I am seeing a few spikes pop up in the recent two weeks of industries bottoming (right side of the chart). This is in line with my long positions getting taken out as the price reaches the stops. But again, it seems a bit “too early”.
Even the breadth looks like one where the cycle is about to end:
Friday’s breadth is barely higher than last week’s lowest point. If we have one more week of down action, I will have to call this current cycle as over.
Industry Highlights
As is characteristic of the cycle ends, we have way more industries in a downtrend than an uptrend. I am carrying over two industries from last week and adding a new one to the highlight list.
Thermal Coal has now been here three weeks in a row:
Here are the stocks I track in this industry:
ticker, company, sector, industry, country
ARLP,"Alliance Resource Partners, L.P.",Energy,Thermal Coal,USA
BTU,Peabody Energy Corporation,Energy,Thermal Coal,USA
CEIX,CONSOL Energy Inc.,Energy,Thermal Coal,USA
NRP,Natural Resource Partners L.P.,Energy,Thermal Coal,USA
HNRG,Hallador Energy Company,Energy,Thermal Coal,USA
NC,"NACCO Industries, Inc.",Energy,Thermal Coal,USA
Footware & Accessories also is extending its stay in this section for three weeks:
Here are the tickers that I track in this industry:
ticker, company, sector, industry, country
NKE,"NIKE, Inc.",Consumer Cyclical,Footwear & Accessories,USA
DECK,Deckers Outdoor Corporation,Consumer Cyclical,Footwear & Accessories,USA
ONON,On Holding AG,Consumer Cyclical,Footwear & Accessories,Switzerland
SKX,"Skechers U.S.A., Inc.",Consumer Cyclical,Footwear & Accessories,USA
BIRK,Birkenstock Holding Plc,Consumer Cyclical,Footwear & Accessories,United Kingdom
CROX,"Crocs, Inc.",Consumer Cyclical,Footwear & Accessories,USA
SHOO,"Steven Madden, Ltd.",Consumer Cyclical,Footwear & Accessories,USA
WWW,"Wolverine World Wide, Inc.",Consumer Cyclical,Footwear & Accessories,USA
Everything else has been going down and pulling back. Metals, Oil, Uranium have retreated and are out of this section for now.
Struggling industries
The list of industries that are undergoing pullbacks is long and I will only highlight a select few.
First, Gold, which did incredibly well this year, but it seems it has run into its first pullback:
Now, the sma200 breadth line is staying steady, so this could be just a normal digestion of earlier gains. Here are the tickers I track for Gold:
ticker, company, sector, industry, country
NEM,Newmont Corporation,Basic Materials,Gold,USA
AEM,Agnico Eagle Mines Limited,Basic Materials,Gold,Canada
GOLD,Barrick Gold Corporation,Basic Materials,Gold,Canada
WPM,Wheaton Precious Metals Corp.,Basic Materials,Gold,Canada
FNV,Franco-Nevada Corporation,Basic Materials,Gold,Canada
GFI,Gold Fields Limited,Basic Materials,Gold,South Africa
AU,AngloGold Ashanti Limited,Basic Materials,Gold,United Kingdom
RGLD,"Royal Gold, Inc.",Basic Materials,Gold,USA
PAAS,Pan American Silver Corp.,Basic Materials,Gold,Canada
AGI,Alamos Gold Inc.,Basic Materials,Gold,Canada
OR,Osisko Gold Royalties Ltd,Basic Materials,Gold,Canada
EGO,Eldorado Gold Corporation,Basic Materials,Gold,Canada
Copper arguably has had even deeper shake down:
But if you look at the individual stocks in the industry, the majority of them are still in good spots for long term trends, and it’s unclear if the pullback is just a minor correction or if this is a change in trend. Here are some of the copper stocks that I keep an eye on:
ticker, company, sector, industry, country
SCCO,Southern Copper Corporation,Basic Materials,Copper,USA
FCX,Freeport-McMoRan Inc.,Basic Materials,Copper,USA
HBM,Hudbay Minerals Inc.,Basic Materials,Copper,Canada
ERO,Ero Copper Corp.,Basic Materials,Copper,Canada
IE,Ivanhoe Electric Inc.,Basic Materials,Copper,USA
Aluminum looks similar, witha deep drop in sma20, but the sma200 is still solid:
This is where one could spend some time to look over the tickers in the industry and decide if they like this as a pullback and start a position on any signs of improvement. Here are the tickers that I track in this industry:
ticker, company, sector, industry, country
AA,Alcoa Corporation,Basic Materials,Aluminum,USA
CSTM,Constellium SE,Basic Materials,Aluminum,France
CENX,Century Aluminum Company,Basic Materials,Aluminum,USA
KALU,Kaiser Aluminum Corporation,Basic Materials,Aluminum,USA
Closing thoughts
It’s been a strange few weeks in the markets for me personally. Even though my equity curve has been beating that of last year, I have been sensing a change in the tone of the markets. I am feeling a little bit out of sync. Thus far, I have chalked this up to it being the start of the summer months and lower liquidity allowing the price patterns to change from the usual movement.
I will continue to keep my posture as if this is the start of the cycle end and prefer shorts more over the long positions. Let’s see how the week opens and where we go from here next. Thank you for reading and have a good one!