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Chart Advisor: Stronger Bonds


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Tuesday, February 25, 2020

1. Bonds rise as stocks and commodities tumble

2. What’s up with solar energy

3. Bitcoin-style buyers take aim at SPCE

Market Moves

Bond prices closed higher by one-half percent marking a 52-week high. This asset appears to be the safe haven of choice in a panicked market. Stocks and Commodities both closed strikingly lower on the day. The price of oil, the Nasdaq 100 index (NDX), S&P 500 index (SPX), Dow Jones Industrial Average (DJX), and Russell 2000 Small Cap index (RUT) all closed the day roughly three percent lower. Gold prices also dropped for the second day in a row, marking a four percent pullback from its highs yesterday. The chart below compares the price of gold as tracked by State Street’s gold price index ETF (GLD) to four different bond funds. The first is iShares’ 20-year Treasury Bond Index ETF (TLT), while the others are leveraged funds including: ProShares’ Ultra 20+ Year Treasury (UPT), Direxion’s Daily 7-10 Year Treasury Bull 3X fund (TYD) and Direxion’s Daily 20-Year Treasury Bull 3X (TMF). The timeframe shown is a daily chart tracking from the beginning of 2020, and the scale shows (no, it is not incorrect) that the 3X leveraged 20-year bond fund is up nearly 40 percent from that point.

What’s Up with Solar Energy

Technology stocks sank and oil prices tanked. Since stocks like Exxon-Mobil (XOM) look even worse than the price of oil, you might expect a stock, or an industry group, that is a combination of technology and energy to do quite poorly. And yet the Solar Energy industry group, as a whole, is faring quite well. In no small part, that performance is influenced by the stunning rise of Solaredge (SEDG).  As the chart below shows, the share price for SEDG is up forty percent for the year with half that coming in just the past week as the company reported better-than-expected earnings. In fact, since 2017, SEDG has risen an eye-popping 800% because it has grown 50 percent per year for the past two years and the most recent earnings report puts them on pace for better than 30 percent growth in 2020. Part of this story is the company’s sales performance to be sure, but another part of the story is the investing mandates of pension and investment funds which require a certain percentage of their funds be devoted to sustainable investing

Bitcoin-Style Buyers Take Aim at SPCE

Today’s market was a rough ride, but the pull back in prices hasn’t actually negated the upward trend that was established over the previous decade. Even so it’s important to look for stocks that seem to weather the storm well because it may be the case that they will be the winners when the buyers return to the market. On that theme, consider the price action for Virgin Galactic (SPCE) today. The chart below shows how this stock fared over the past two weeks when compared to both Tesla (TSLA) and Invesco’s Nasdaq 100 index ETF (QQQ). It almost seems as if those Bitcoin buyers who popularized the HODL (hold on for dear life) investing strategy have taken up with SPCE shares. Though the stock was fluctuating 16 percent on average over the past five days, it ended less than two percent lower today, managing to retain most of its two-hundred percent rise for the year so far.

The Bottom Line

Stocks tumbled three percent today with investors taking profits in the wake of reports over the potential business impact of the Coronavirus. Bonds hit 52-week highs even as commodities fell. Two stocks holding on to their relative strength include SPCE and SEDG.

Originally Published on February 25, 2020

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