I will be back in a moment with some more individual ideas, but consider the weekly chart of engineering and construction giant Flour, below. File this under the “more evidence of a high stakes battle for rotation into the energy/material/industrial complex” folder, as you can see a narrowing multi-year pattern of lower highs, but higher lows.
With utilities and REITs being sold aggressively, the stakes for a capital rotation are only going up. If you traded during the last cyclical bull, from 2003-2007, then you will recall Flour’s incredible late-stage rally as many of the prior leaders in the bull were actually already rolling over. What happened was that a stock like Flour took the baton from the likes of Google and became the new leader, until the whole market eventually rolled over.
To my eye, a breakout about $67 adds tons of credence to a durable rotation thesis, while losing $59 below indicates a more sloppy action to come, at best.
Watch it.
_________________________________________
Thanks chess, I wasn’t involved in the markets until 2008.
Let’s say GOOG, AMZN, JNJ sell off and rotate into FLR. How quickly and to what extent does that affect FLR price and volume? I’m not sure how the math works out in those kind of scenarios, but I do see that the total market cap of FLR is only 4-10% of those giants’ value.
Thanks, charlie. Generally what should happen is capital will flow not only to FLour but if the rotation persists, into XOM CVX COP –plenty of market cap to go around. But Flour is a good ancillary play which was a great “tell” six years ago during that rotation.