This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Industrial Products Stocks May Catch QE Fatigue

Stocks in this article: XLI^DJIBADEGE

NEW YORK ( TheStreet) -- Much of the stock market rally since early June has been in anticipation that the Federal Reserve would implement QE3, and the central bank did so on Sept. 12.

The Dow Jones Industrial Average tacked on additional gains for only two more days after that and has since trended sideways to down as weaker-than-expected economic data and earnings warnings have pricked the hype of QE euphoria.

I began to worry about what I describe as "QE fatigue" on Sept. 21 when I wrote " QE Fatigue Plagues Transports, May Be Contagious," and at the end of the third quarter, the Dow Transportation Average was down 2.5% for the year, while the Dow Jones Industrial Average was up 10.0%.

On Sept. 28 I wrote " QE Fatigue Spreads from Transports to Semiconductors" and illustrated how the Philadelphia Semiconductor Index (SOX) broke below its 50-day and 200-day simple moving averages and ended September with a negative weekly chart profile. The SOX ended the third quarter up just 4.9% for the year, while the Nasdaq was up 19.6%.

Today I will show that QE fatigue could now be spreading into the industrial products sector.

Last week Caterpillar (CAT) cut earnings expectations through 2015.

Last Thursday the final reading for second-quarter GDP came in at 1.3%, below the advanced and preliminary readings at 1.7%. Durables goods orders were down 13.2% in August, and the Chicago ISM is now just below 50. These data are symptoms that the industrial product sector is catching QE fatigue.

At www.ValuEngine.com we show the industrial products sector 4.0% overvalued, and that there are 10 sectors that are even more overvalued.

If you focus on the technicals, however, the Industrial Select Sector SPDR Fund (XLI) will have a negative weekly chart profile given a close last week below the five-week modified moving average at $36.67.

Given this close, momentum will be declining from overbought territory with risk to the 200-week simple moving average at $30.74, which came into play a year ago. This is a technical warning of QE fatigue.

The daily chart for XLI ($36.53) shows a trading range for 2012 with highs at $38.17 on March 15 and at $38.07 on Sept. 14, and a low at $33.08 on June 4.

The daily chart is technically negative with declining momentum and closes below the 21-day simple moving average at $36.87.

A close below the 50-day moving average at $36.48 indicates risk to the 200-day moving average at $36.00.

My semiannual value level lags at $27.72 with a monthly pivot at $36.50, and annual and quarterly risky levels at $37.74 and $39.58, respectively.

1 of 4

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,805.41 +127.51 0.76%
S&P 500 1,964.58 +13.76 0.71%
NASDAQ 4,483.7150 +30.9230 0.69%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs