The Investor’s Business Daily 100 Index has been a pretty good proxy for the momentum crowd and outstanding contrary indicator when it gets top-heavy. For example, last October, 14 component companies were based in China (not a bad time to be shorting the FXI, -27.0% since). Last December, tech momentum darlings were well represented: Priceline #5, Apple #7, Research in Motion #9, Synchronoss Technologies #15, VMWare #17, Google #32, Garmin #44. The seven are down on average 21.6% since vs. -8.6% for the S&P 500 and -11.5% for the Nasdaq 100.
Today the IBD 100 is chock full of commodities companies, especially those in agriculture and oil & gas:
Agriculture: 11 (up from 6 last Dec)
Energy: 32 (up from 10)
Total commodities: 52 (up from 28)
Brazil/Chile: 10 (up from 5)
Industrials + Commodities + Emerging Markets + Shipping: 72 (up from 61)
Companies from Texas, Louisiana and Oklahoma are well represented: 28, up from 11 in Dec. 16 are based in Houston.
Also, Intrepid Potash (IPI) went public today and popped 50%. Cramer (our favorite contrary indicator) has jumped on the commodity bandwagon. And Market Vane’s Bullish Consensus has corn at 81% and crude oil at 90%.
Our strategy: Avoid commodity-related stocks, short grains and crude oil.