Recovery?
November 20th, 2009
The markets have been trending sideways for the last few weeks as investors try to determine if we are now in the start of an economic recovery, or still in recession. Stocks have rallied over 18% since the start of the year. Some investors are afraid they have missed the boat and others think the markets have moved to far to fast, being up about 60% from the March lows. Alan Brochstein recently ran a screen to try and find some ideas and came of with a list of “rebounders”. So are these stocks worthwhile and is this a good time to buy?
Alan’s screen was based on fundamental criteria, so lets take a different perspective and look at these utilizing a technical screen. First, lets determine if our perspective on the overall markets are bullish or bearish. Last week, I introduced the technical approach developed by Dr. Charles Schaap. So lets stick with this criteria. Using the SPY, which is an etf of S&P500, lets look at a weekly chart.
Courtesy of Stockcharts.com
Price is above the 50 week moving average and RSI is greater than 50, so our premise is that we are at the beginning of a recovery and the market is bullish.
Now lets look at the stocks brought out by the screen.
|
Stock |
Symbol |
Technical Rating |
Comments |
|
Roper Industries Inc. |
ROP |
YES |
|
|
Watson Wyatt and Co. |
WW |
NO |
Worthy of a watchlist |
|
Matthews International Corp. |
MATW |
NO |
Worthy of a watchlist |
|
Devry, Inc. |
DV |
YES |
High Unemployment may induce people to get training |
|
Alberto Culver Co. |
ACV |
YES |
|
|
Pepesico, Inc. |
PEP |
YES |
|
|
Procter and Gamble, Inc. |
PG |
YES |
|
|
Becton and Dickinson, Co. |
BDX |
YES |
|
|
Abott Laboratories |
ABT |
YES |
|
|
Magellan Health Services, Inc |
MGLN |
YES |
Broken its downtrend line, may be a good entry on a pullback |
Based on the table above, I agree with Alan, these stocks show promise. However, my only caveat is that there is a possibility that the stock markets did get ahead of the economic fundamentals. Unemployment rates remain high, and consumers are still cautious about spending. Also, the lackluster performance of Dell Computer Systems (DELL) suggests that tech spending is still anemic.
While we may not get a deep dip like some pundits are expecting, we may remain in a prolonged sideways trading range. So while these stocks have the potential to rebound, they may move up very slowly.
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