Stocks rose modestly higher on Monday in a session that was largely absent of news drivers from the worlds of economic data, earnings reports, geopolitical events or monetary policy statements. In other words, investors were largely left to their own devices, and made decisions on the merits of individual stocks rather than the macroeconomic environment.
In that context, it was nice to see that market participants still wanted to accumulate securities without being hounded by policy makers.
The only stocks that were tripped up from the macro environment were cable television carriers like Comcast (CMCSA) and Charter Communications (CHTR), which were sold off after the White House said it planned to call on the Federal Communications Commission to implement the “strongest possible rules to protect net neutrality.”
Overseas the major driver of new thoughts was economic data out of China. Exports were a little stronger than expected, but imports were weaker; meanwhile, inflation measures were subdued and suggest a slowing economy. This has increased expectations for further stimulus measures.
China’s consumer price index was reported near a five-year low, and its producer price index showed a record 32nd consecutive decline. A report from the Shanghai Securities News said the data showed signs of manipulation and inflows of hot money.
More broadly, a majority of Chinese provinces reported slowing growth in the January-September period. That’s 19 out of 31, if you’re counting. Three grew at the same pace, and nine saw an increase in growth. All have missed their targets. Eighteen of the provinces reported nominal growth below real growth, which indicates deflation. Provincial data is considered less reliable than national numbers. This is considered a mild positive, as it shows that Beijing’s efforts to slow the economy without a crash are working.
It’s interesting to me that most of the stocks that look good for trading right now are the most defensive: telecoms, health care, utilities and big-cap tech. Not so much high-beta technology or financials. My Trader’s Advantage subscribers have had good luck lately with retailers, health care, transports and industrials — and today I’m recommending a trade that is closely related to the latter two groups in particular.
Alcoa (AA) is the largest aluminum miner and processor in the United States. Its products are used in car and aerospace manufacturing, as well as residential and commercial construction. AA shares are climbing up the middle of their Keltner channel and just bounced off that level recently. They should head back to the top of the channel.
Buy AA at current levels (around $16.35) for target $17.35. Set a protective stop at $15.95, good till canceled.
Jon Markman operates the investment firm Markman Capital Insights. He also offers a daily trading advisory service, Trader’s Advantage, and CounterPoint Options, a service that helps individual traders make steady, consistent profits with volatility-related instruments.
