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What's
Hot (and Not) With Small Caps? |
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As
promised this past weekend, we're going to look at the market's key charts
today as we continue to navigate what so far has only been considered
a 'bear market rally'. It may only be that, but we're still 10% above those
recent lows, and that goes a long way in healing the wounds (even if
only temporarily).
We'll look at
this chart first, but only briefly. We want to leave some room and
time to highlight a few small cap groups that look particularly bullish,
or
bearish, as the case may be.
We'll wrap up
with an interesting update from an old friend.... Spicy Pickle Franchising.
Someone forget to tell their Bread Garden division we're in the middle
of a recession, as they're growing like the economy is just fine.
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Still
Going Strong, But Pressing Our Luck |
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The last six
trading days have been great, with the market rebounding right at
a point when most people thought all hope was lost.
While we're
taking a minority stance and acknowledging we may have just hit 'the' bottom,
we also want to warn you all those 'bear market rally' proponents
may be on the verge of being able to say "I told you so." Don't take their
taunts at face value though.
 If
the market does pull back - and we think it will - those same pundits
who didn't see the bounce coming also don't know how long or how
big that pullback will be. In other words, don't flinch at the first
sign of weakness...we have no reason to think a dip will be any greater
than enough to bleed off some of the current overbought pressure.
Why the expectation
for a pullback now? In short, we're overbought. We at least need to
consolidate around current levels, if not give up some ground, before
we leave traders no choice but to create a profit-taking meltdown. That's
the biggest risk at this point.
On the upside,
for the S&P 500 the major line in the sand is 811, or 33 points above
where we closed Tuesday. That's a little more than 4% above where we are
now, so we may or may not even make it that far before running into an
insurmountable headwind.
And where
did we get 811? It was support a couple of different times over the
last few months, and support has a way of becoming resistance later on.
Ideally, 744
will hold up as support from here, but as long as we hold onto about half
of what we've regained, then stocks will remain positioned to attack and
topple resistance at 811.
Oh, and if 811
is crossed, the ensuing rally could be a monster. It would be mostly
hype-based and therefore temporary, but it could still be a monster.
We'll talk about that when/if it happens.
Though our expectation
for the market in the near-term is volatile bullishness, the small caps
in a few specific industries seem to be trending independently of the market
- bearishly and bullishly. Since these groups may contain good trading
opportunities, we'll look at some of the best (in our opinion) here.
Some of the
small charts are displayed, but to view a bigger chart for all the groups,
click on each industry heading below.
- What's
Hot -
 Tobacco
Remember how
we mentioned Alliance One International (AOI) was starting to accelerate?
We hope you were listening back on February 19th when we pinpointed the
stock, since it's up 25% since then.
Though we're
naming tobacco again as a breakout industry (small caps only), we'll also
caution investors against piling on now. If you're interested, wait for
a pullback. Also bear in mind that momentum alone won't push the stock
up forever, though momentum is the key reason we're looking at it now.
Retail
This is more
of a recent phenomenon, but still a good one.
Since March
9th, the small caps in the retail group are up 20.8%. It remains to be
seen if this sentiment-sensitive group can keep going, but there are some
major values buried in the pile here. Granted they're buried with legitimate
losers, as the baby got thrown out with the bath water. The winners are
there if you're willing to hunt and sort though. One of the retailers we
mentioned a few weeks ago - Kirkland's - paid off with a big 9% move Tuesday.
 Oil
& Gas Refining
Just to be clear,
we're specifically talking about the refiners here. Small cap oil explorers
and small cap oil services (and of course the integrateds) have done pretty
well too, but the small cap oil and gas refiners have been where the rally
is. They lead the market's rallies, and resist the market's pullbacks.
If the economy really takes off (and we think we're getting there), the
need for refining could crank up in a hurry. We believe speculation to
that end is what's happening here.
Household
Products
What exactly
is a 'household product' company? There's some gray area in the definition,
but the industry showed up on our hot list without any help from the 'durables'
in the group. That leaves behind non-durables, furnishings (not unlike
Kirkland's), and even home construction. In other words, this is a bit
of a catch-all.
Nevertheless,
some of the recent leaders here have been HH Gregg (HGG), Acme United (ACU),
and Scotts Miracle-Gro (SMG). It's still a bit ambiguous, but if you think
'boring' you'll be on the right track to finding these stocks.
- What's
Cold -
 Personal
Products
Might we interpret
the fact that personal product stocks are sinking as a hint of a flight
from safety and a flight to risk? Based on this dynamic (particularly of
late) it looks traders are thinking this way. Just something to think about.
Anyway, the
small caps in the group are trending lower. There may be some shorting
opportunities here, but it's at least a group to avoid for the time being.
Steel
You can add
aluminum here is a sub-group; its stocks are sinking too.
This is actually
a bit of a surprise considering there are now glimmers of an economic turnaround.
A more robust economy should ramp up the demand for steel. It doesn't seem
to matter though. Just remember this weakness is specifically in steel
and aluminum stocks, and doesn't seem to be affecting any other mining
or materials stocks. We'll blame the bulk of Tuesday's big dip in small
cap steel stocks on Gibraltar Inds. (ROCK) and Olympic Steel (ZEUS), though
you don't have to look hard to find a loser of any market cap in this industry.
That's it for
now. You've got a good starting point if you're looking for a trend-based
trade.
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Spicy
Pickle's Bread Garden Unfazed by Recession |
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We're not going
to over-comment on the Spicy
Pickle (OTCBB:SPKL) news, as the press release below speaks for
itself. We'll just point out how the company has survived - and even
thrived - in a crappy environment. How well could they do when things
are good? Recessions may be a reason for investors to play defense,
but that doesn't mean companies are closing shop.
Spicy Pickle's
Bread Garden Urban Cafe Set for Ambitious Expansion
Tuesday March
17, 2009, 3:45 pm EDT
DENVER, CO--(MARKET
WIRE)--Mar 17, 2009 -- Spicy Pickle Franchising, Inc. (OTC BB:SPKL.OB),
fast casual restaurants serving all natural premium meat and poultry and
other fresh products, provides this update on current business activity
at its Bread Garden Urban Cafe chain.
Marc Geman, CEO
of Spicy Pickle Franchising, Inc. which is the franchisor of the Bread
Garden Urban Cafe chain, said, "While we provided information earlier this
year in a broad release on the status of the company a recent article in
a Vancouver, BC business publication focuses on our expansion efforts and
the strong connection that the Bread Garden brand name carries in the Greater
Vancouver market. Western Canada, as we predicted when we bought the chain,
is weathering the economic storm better than most areas and is providing
us with expansion opportunities.
"I just returned
from Vancouver and there is a lot of excitement about our expansion. We
met with the Vancouver airport authorities and began the process of scheduling
access to our location on the C concourse for an opening later this summer.
We also toured the University of British Columbia Bread Garden Urban Cafe
that is soft opening this week. Along with the Kamloops airport site which
will open early this summer and the new locations in downtown Vancouver
at Hornby and Davie and the new CBC building we will add five restaurants
to the chain. Our associate, Zahir Dhanani, will be traveling to Australia
to open the first Bread Garden Urban Cafe in Brisbane at the end of March.
"We have several
other locations we are working on along with a large effort to improve
the menu offerings and make the operations as efficient as possible to
ensure consistency throughout the chain. This acquisition is turning out
to be very timely and presents a great ongoing opportunity for the company."
The recent article
that was featured in a write up in "Business in Vancouver," a regional
business publication, can be viewed in its entirety by going to the following
link http://www.spicypickle.com/news/breadgarden.html
About Spicy
Pickle(TM):
Founded in 1999,
Spicy Pickle Franchising, Inc. (OTC BB:SPKL.OB) serves high quality meats
and fine artisan breads, baked fresh daily, along with a wide choice of
eight different cheeses, twenty-two different toppings, and fourteen proprietary
spreads to create healthy and delicious panini and sub sandwiches with
flavors from around the world. As a leading "fast-casual" concept, Spicy
Pickle offers menu items that are far beyond traditional fast food but
without the price point of casual dining. The hallmark of a Spicy Pickle(r)
restaurant is quality, service and an enjoyable atmosphere. The company
is headquartered in Denver, Colorado, with restaurants open across 12 states
and more in development nationwide. Spicy Pickle Franchising, Inc. also
operates as franchisor for Bread Garden Urban Cafes, a concept with restaurants
in the metropolitan Vancouver, Canada area. Bread Garden Urban Cafes serve
coffee, pastries and breakfast items as well as lunch and dinner along
with a wide variety of desserts. To find out more about Spicy Pickle (OTC
BB:SPKL.OB), visit our website at www.spicypickle.com/.
Forward-Looking
Statements:
Certain statements
in this press release, including statements regarding the number of restaurants
we intend to open, are forward-looking statements. We use words such as
"anticipate," "believe," "could," "should," "estimate," "expect," "intend,"
"may," "predict," "project," "target," and similar terms and phrases, including
references to assumptions, to identify forward-looking statements. The
forward-looking statements in this press release are based on information
available to us as of the date any such statements are made and we assume
no obligation to update these forward-looking statements. These statements
are subject to risks and uncertainties that could cause actual results
to differ materially from those described in the statements. These risks
and uncertainties include, but are not limited to, the following: factors
that could affect our ability to achieve and manage our planned expansion,
such as the availability of a sufficient number of suitable new restaurant
sites and the availability of qualified franchisees and employees; risks
relating to our expansion into new markets; the risk of food-borne illnesses
and other health concerns about our food products; changes in the availability
and costs of food; changes in consumer preferences, general economic conditions
or consumer discretionary spending; the impact of federal, state or local
government regulations relating to our franchisees and employees, and the
sale of food or alcoholic beverages; the impact of litigation; our ability
to protect our name and logo and other proprietary information; the potential
effects of inclement weather; the effect of competition in the restaurant
industry; and other risk factors described from time to time in our SEC
reports.
Contact:
Marc Geman
Spicy Pickle
Franchising, Inc.
http://www.spicypickle.com
(303) 297-1902 |
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Updated: 8:15 pm PDT (03:15 GMT), November 2, 2010
