Stocks This Week: Buy Applied Materials And Thermo Electron

Market forecasting has been difficult recently. The S&P corrected in a time interval that has traditionally been bullish. The coming week has been weak seasonally. Scanning the USA indices, we see that the best performer has been the NY Composite which has risen almost 54% of the time compared to the weakest performer, the Dow Jones Transport index which has been up only about 35% of the time.

We skip forward to mid-month. The second half of the month features some of the strongest weeks in the calendar year. In fact, the strongest period of the year in the DJIA from 1915 has run from December 15^th through January 11^th. The index has risen 74% of the time for an average gain of 2%. The annualized return has been 27%. Below, we see a list of US indices and their returns in that period.

These numbers are far better than those for the coming week. Thus, we look past this week into that mid-December-early January interval.

Here is a screen of S&P stocks that have performed best in that period. To select some stocks for short-term trades, the following strategy is employed. The best-performing stocks in the December 15-Janaury 11 period with at least 20 years of price data are calculated and are presented below. The stocks are ranked by the percentage of time periods in which the stock rose.

Invesco has risen 84.0% of the time. The return has been 6.07% and the expected return (the product of the first two numbers) is 5.1%. The stock has been trading for 25 years.

Best Performing S&P 500 Stocks from December 15^th to January 11^th  

From this list, the stocks are screened for relative strength and by dynamic cycles. The latter term refers to the most active cycles that are generating profits now

Applied Materials displays rising relative strength. Daily momentum shows a series of higher lows. The average low for the month has occurred in the period from the 12^th through the 14^th. This appears to be a buy point. The $160-$165 area is a likely target by early January.

Chart 1

Thermo Electron has exhibited excellent relative strength. Momentum appears to be constructive. The share price is due to rise to new highs above $650 per share. December has been the second-strongest month to hold the stock, up 66% of the time. The 14^th has been the low point for the month.

Chart 2