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Are Late-Cycle Industrial and Energy Stocks About to Take Charge?


The market is showing signs of reversion to older analogs.

This article was originally posted on the Buzz & Banter where subscribers can follow over 30 professional traders as they share their ideas in real time. Want access to the Buzz plus unlimited market commentary? Click here to learn more about MVPRO+.

This is ponderous man, really ponderous
-- 2NU
There are so many questions to ponder today! 

Here are mine in no particular order:

Are stocks transitioning to the 1985 analog? This is my second favorite analog next to the 1992 one posted on May 1 [subscription required]. New highs in May could be tipping the hand toward that one.

Click to enlarge

What if the market is rotating into late-cycle leaders like industrials, energy, and some staples? Does the fact that banks and tech are dragging matter? (I still think no, as long as the S&P 500 (INDEXSP:.INX) stays over the 50-day moving average.) In my opinion, high-quality industrials like Eastman Chemicals (NYSE:EMN), and energy names with fracking exposure like C&J Energy (NYSE:CJES) and Flotek (NYSE:FTK) (See: 10 Stocks to Watch in 2014) are likely to perform well.

What if a low beta is going to create more alpha this year? It sure seems that way. Does it make sense to buy and hold low-beta stocks but trade high-beta stocks?

Was yesterday the top in bonds, or just the start of another pullback into the trend line? (See my post from 5/21 [subscription required].)

Click to enlarge

Do I follow the trend?

If traders already knew that the weather was bad and stocks didn't go down before a -1% GDP print, then why would the news change their minds? Answer: Markets are forward-looking.

Are commodities breaking loose of the last five years' correlation? Can precious metals fall while consumable commodities and industrial commodities rise like mad?

Which is better over the next nine months? China (represented by the iShares China Large-Cap ETF (NYSEARCA:FXI) or Brazil (represented by the iShares MSCI Brazil Capped ETF (NYSEARCA:EWZ))? My bet is still Brazil, even with it in the red today (See my post from Wednesday [subscription required].)

Is it crazy to do a 10-state road trip with three small children over the summer? I'll let you know after the fact. What are the kid-friendly "must-sees" in Arkansas, western Tennessee, and Kentucky?

Am I upset that the constant rain in central Texas ruined my fishing plans today? No way -- we need rain more than you can imagine!

Do I still think it's a "value over growth" year? Yes, and my portfolio has a massive value tilt.

Is Twitter (NYSE:TWTR) above my buy point? Yes, no, yes, no...arghhhh!!! However, I'll sell it around $62 when it gets that high.
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Position in TLT, EMN, FTK, CJES, EWZ, TWTR.
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