New Industry Out-Performance Idea Presents Opportunity for Alpha
The first chart below shows the ratio of the DJ Medical Equipment Index vs. SPX. The ratio has traded sideways for a decade now, meaning medical equipment names have effectively been market-performers over that time. However, since 2006 the ratio…...
Russell 2000 Faces Resistance on a Relative Basis & Could Under-Perform for Years
Dating back to June of this year we have been suggesting that the potential for a longer-term reversal in the USD could lead to small-caps sustainably under-performing the broader market. We continue to believe this today. Even if the USD…
Spread Trade Opportunity in Home Furnishings
Long WSM / short BBBY. The ratio b/t the two below broke out to the upside recently and over the past few weeks (especially this week with BBY’s post-EPS decline) appears to have successfully old resistance line (1) as new…...
Time to Buy This Euro Financial
Three charts below: 1) Euro – weekly: breaking out above trend-line resistance 2) Ratio – DJ Euro Financials Index vs. SPX – weekly: breaking out above trend-line resistance 3) NBG – weekly: sits atop important support line (1) and is…...
Airlines Continue to Out-Perform the Broader Market but is the Pace Set to Accelerate?
The chart below plots the ratio of the SPX vs. FAA (airline ETF). Note that this week the ratio is breaking below support line (1) and seemingly falling back into a channel whose bottom is defined by line (2). If…
Time to Take Profits on Short AAPL / Long GOOG Spread Trade
On October 3rd, when it stood at ~0.88, we noted the ratio of AAPL vs. GOOG still had ~20% in additional downside (i.e., GOOG had the same amount of out-performance left vs. AAPL) until it hit noteworthy support. As of…
Spread Trade Opportunity in Basic Materials
Long FCX against a copper short, but not yet. In the chart below I plot the ratio of FCX vs. copper. If the ratio is able to trade down to ~0.073 from its current ~0.088, or by ~17%, it will…...
Euro Financials Have Beat the SPX by 30% Since Summer, Now What?
The chart below plots the ratio of the DJ Euro Financials Index vs. SPX This ratio has risen by ~30% since this summer after bottoming along line (3). For some background on why Euro-centric has out-performed U.S.-centric in recent months,…...
Correlation vs. Causation – Why Has This Industry’s Relative Strength Been So Dependent on the USD Since 2000?
The chart below plots the ratio of the the S&P500 Food Retail Index vs. the SPX since 2000 in black. In green, it also plots the path of the USD over the same period. Why are these two items so…...
Long CREE / Short PANL Spread Trade Now Up 45% in Two Months; Any Juice Left in the Squeeze?
Updating this trade given yesterday and today’s big decline in PANL post EPS. The technical set-up we highlighted on 9/27 appears to be playing out as hoped for. Though the ratio is now reaching an area of support confluence in…...