Below, you will find a sub-section from my Strategy Session headed into the week of 11/26/12-11/30/12. I called attention to the auto stocks. Continue to watch them into year-end and 2013. They were an excellent tell that the correction this autumn was a buyable one. That may change next year, which is all the more reason to watch the sector even if you do not trade it. Toyota, mentioned below, is particularly impressive, as is General Motors. Please click here for more details about subscribing to the chessNwine Weekly Strategy Session.
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3. The Auto and Auto Parts Industry Stocks Have Shown Rather Uniform Impressive Relative Strength to the Broad Market in Recent Weeks and Even Months. Should the Market Continue to Recover from the Correction, These Stocks are Likely to Continue to Outperform.
Paying attention to relative outperformers during a market correction, even if you exude patience and do not immediately enter the trade, is often instructive so that you are prepared to strike when the tide turns back in favor of the bulls. With that in mind, let us take a look at Ford and General Motors, undoubtedly the two names which come to mind when investors think about auto manufacturers.
Their respective daily charts below both indicate unambiguous strength since mid-September, especially when you juxtapose this performance versus the 9-12% correction suffered by the major indices during that time period.
Moreover, when looking at other stocks in the auto industry, as a whole, you will find a plethora of impressive charts. Again, compare the price performance of the following charts to the broad market since mid-September.
Also worth watching for strength in the auto sector are: KMX LAD SAH TM TSLA.
When you consider how inherently economically-sensitive the auto industry is, this type of outperformance in a market correction weakens the bear case for an imminent recession and, by proxy, likely bear market to accompany it. Economic arguments aside, the technicals strongly point to the auto industry being in prime position to outperform in a stabilizing market.
