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Trading an Accelerating American Industrial Sector

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• published: 27 Dec 2014
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http://profitabletradingtips.com/trading-investing/trading-an-accelerating-american-industrial-sector Trading an Accelerating American Industrial Sector By www.ProfitableTradingTips.com American industry has been on the upswing pretty much since the low point of the recession. Our interest is in trading an accelerating American industrial sector. Trading Alpha noted the surge in U.S. Industrial Production recently. Industrial output increased sharply in November vs. the previous month, rising at a rate that beat expectations by a wide margin (+1.3% vs. Econoday.com’s consensus forecast of +0.7%). This morning’s monthly release strengthens the case for expecting that the Federal Reserve will begin raising interest rates next year, perhaps sooner than the mid-2015 forecast that’s been widely cited in recent weeks. Meantime, today’s numbers clearly show that the US economy so far appears to be immune to the economic slowdown that’s weighing on China and the stagnation that continues to afflict the Eurozone. Today’s bullish report on industrial activity follows surprisingly strong November numbers on retail sales and payrolls for the US. With economies in Europe, Asia and many developing nations in the doldrums the US is the sole bright spot these days for growth and investment. Where is the best place to put your money and when is the best time for trading an accelerating American industrial sector? Oil Prices, Interest Rates and the Value of the US Dollar The US oil fracking boom plus continued high production by OPEC has driven oil down to unforeseen lows. To the extent that this continues it is time to buy in trading an accelerating American industrial sector. If the US Federal Reserve comes to believe that the US economic recovery is sufficiently far along they will likely raise interest rates which makes doing business more expensive. Depending on how soon and how far they raise rates it may be time to put things on hold in trading an accelerating American industrial sector. And, when the Fed raises rates the value of the US dollar will go up versus other currencies. This will have two consequences. Investment capital will flow more readily into the USA and the price of US exports will rise. The eventual result of this would be a deceleration of US industrial growth and a reason to sell in trading an accelerating American industrial sector. The consensus seems to be that rates are going up. An article in the Dallas Morning News comments of the effects if interest rates are heading higher. With the economy gaining momentum, economists generally expect the Federal Reserve to start raising interest rates next year. Although a major boost seems unlikely, any upturn will increase borrowing costs for consumers. Those increases would most directly affect rates charged on variable-rate credit cards - almost all credit cards these days have variable, not fixed, rates - home equity loans, adjustable-rate mortgages, and student and auto loans. Fixed-rate mortgages - which were averaging 3.93 percent on a 30-year loan last week, according to Freddie Mac’s nationwide survey - should head higher even earlier, McBride said. “You’ll likely see them begin to move up as the timetable for Fed action comes into focus,” he said. The effects of an interest rate hike make everyone’s life more expensive directly adding to costs of doing business and reducing demand from consumers dealing with higher interest rates. If the Fed raises rates too far and too fast will certainly be time to put any purchase orders on hold in trading an accelerating American industrial sector. What to Trade An all-around good way to trade the American industrial sector is the S&P; 500 Industrial Sector Index. An ETF such as SP500-20 or SP500-20TR are good choices for tracking this sector. In the last two years or so the INDEXSP:SP500-20 risen from just over $3000 a share to $480 a share as seen on Google Finance. How long with this growth last and when is the time to bail out when trading an accelerating American industrial sector? You will need to track the basics and market sentiment as this story unfolds. http://youtu.be/twpCdbvDYRg