D&D Note (8-7-2012) ~ Major Rotation Into Cyclicals Fuels Rally

D&D Note (8-7-2012)

The stock market rally continued today after stronger jobs number on Friday and hopes that the ECB will buy Spanish and Italian government debt. Boston FED President Eric Rosengren called for “more substantive action than we’ve taken to date.” Meaning a more open-ended monetary policy of bond purchasing – or commonly known as quantitative easing. Currently Rosengren is not a voting member of the FMOC.

Today saw a massive rotation in markets with traders dumping defensive plays for cyclical names. Investors also don’t want to get caught short if the ECB and Super Mario bust out the bazooka. Commodities and the makers of machines to extract the commodities where big winners on the day.

Overall it seems that traders are beginning to get a better outlook on the election, which seems to be most likely Obama, thus there will be a higher tax on dividends next year. So today defensive dividend plays got dumped for aggressive buying of cyclicals and growth stocks. Meaning… it could be a good time to take some profits in your defensive plays and start moving into more aggressive positions heading into September.

ETF Winners on the Day: ( all up over 1% today)

XHB – homebuilders

XLE – energy

PEJ – leisure and entertainment

JJC – copper

UCC – consumer services

SLX – steel

FCL – consumer cyclical

BIB – ultra biotech

ETF Losers on the Day:

FCD – consumer defensive  -0.94%

XLU – utilities    -1.03%

FHC – health care    -0.71%

XLP – staples     -0.53%

XLV – health care   -0.23%

Pfizer (PFE) fell today after the drug maker discontinued clinical drug studies for Alzheimer drug.

Fossil (FOSL) up 30% after 2Q profits jumped 12% and beat forecasts.

Disney (DIS) was down .82% in after hours with shares at $49.40 after beat on bottom line but missed top line. 3Q EPS of $1.01the estimate was .93 cents. REV $11.01B the estimate was for $11.30B. Disney has been one of the best performers this year on the DOW.

Some Rotation stocks to keep on your shopping list: (percentage gains for today listed next to ticker symbol)

ACM – 17.77%

MOV – 13.47%

TSO – 5.04%

JOY – 4.98%

MU – 3.81%

WNR – 2.16%

COH – 1.91%

CNH – 1.78%

EMR – 1.74%

CAT – 1.01%

GE – .72%

DE – .69%

The DOW (INDU) gained 50.71 points at .39%. The Nasdaq (COMP) rose 25.95 points at .87%. And the S&P 500 (SPX) added 7.10 points at .51%.

Oil gained $1.34 to close at $93.54 a barrel

Gold fell today 30 cents to end at $1,615.90 an ounce.

The 10-Year Note fell pushing the yield up to 1.63%.