Monday, September 9, 2013
An idea that strikes many people as crazy is producing stock rallies all over the place...
The idea is that despite all the negative press it's getting, the economy is somehow "not falling apart." It's slowly getting better. This means growing demand for cars, cement, steel, and shipping services.
A good example of this is the bull market in automotive giant Ford Motor. It boasts the top-selling car (Focus) and the top-selling truck (F-Series).
This week, the automotive sector released its results for the month of August. The industry sold 1.5 million vehicles in August, a 17% gain over the same month last year. Ford registered its best month for retail sales since 2006. Sales of some models are so strong that some automakers can't keep up with demand.
This fundamental backstory has helped Ford reach a new yearly high in the past few months. The stock is up 33% this year. You can see its bull market in the chart below:
Another example of this idea is the stealth bull market in shipping stocks.
Shipping stocks rise and fall with demand for things like oil, grain, iron ore, and manufactured goods. Monitoring their revenues and share prices is a good way to gauge the health of the global economy.
A good way to monitor the global shipping business is with the Guggenheim Shipping Fund (SEA). This fund's holdings haul oil, coal, grain, natural gas, and manufactured goods across the world's oceans. Danish shipping giant Maersk, which is the world's largest container-ship operator, is the fund's largest holding.
Overcapacity and a sluggish economy kept this fund in the dumps during 2011 and 2012. But as you can see in the chart below, SEA is recovering. In just the past week, it reached a fresh 52-week high. This is an important "stealth" bull market almost no one is talking about. And it's a good sign for the global economy.
What's a trader to do with this information?
Well, the first thing is to drop any bias you have toward thinking the economy is doing well or doing poorly. What you think about the economy doesn't matter. What matters is what other people think about the economy.
Second, realize that the trend on most economically sensitive assets is up. That means being long sectors like steel, automakers, and coal makes a lot of sense.
Frank Curzio also recommends buying steel. "We are seeing several catalysts that suggest this sector is ready to stage a huge rebound," he writes. "Traders could see big, double-digit gains in a matter of days… The long-term returns could be much higher." Get all the details on this trend here.
"Hundreds of thousands of traders have blown up their trading accounts by trading against uptrends and by trading against downtrends," Brian Hunt says. "Trends can last a long time… and you must either trade with the trend, or step aside." Learn more in this Common Sense Guise to Technical Analysis.