STRATEGIES

The market appears to have already voted on these two defense related companies according to Moneyshow’s Tom Aspray as their technical action suggest continued growth in addition to a 2.6% yield.

Stocks had a quiet session Monday ahead of the election as the moderate early selling was well absorbed. Tuesday’s trading is likely to be similar and we could see further dumping of utility stocks as some fear dividend taxes will be raised.

The Select Sector SPDR Utilities (XLU) was down 1.6% Monday and now has a yield of 4.02%. Many of the individual utilities and other high yielding stocks dropped even more. Some of the high yielding stocks I have previously recommended are now reaching more important support so the action over the next week will be important.

Clearly there is plenty of money on the sidelines, and I would expect stocks to bounce once the dust settles from the election. The common perception is that defense spending will be higher under a President Romney than it would be under a second term for President Obama.

These two defense stocks have broken through their weekly resistance and have outperformed the Spyder Trust (SPY) by over 8% just since the start of September.

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Chart Analysis: Honeywell International Inc. (HON) is a $49.2 billion aerospace/defense product and services company that yields 2.6%.

  • The weekly chart (through 11/2) shows that HON overcame weekly resistance, line a, at $62.70 and the all time highs from May 2008 just three weeks ago.
  • The weekly relative performance or RS analysis has turned up sharply over the past five weeks.
  • The support at line c appears to have held with next resistance at the February 2012 highs.
  • The weekly OBV broke through its resistance, line d, in early August and has been above its WMA since late 2011.
  • There is major support on the monthly charts in the $52 area.

The daily chart of Honeywell International Inc. (HON) shows a series of higher highs but the ranges recently have been quite wide.

  • HON has been holding its 20-day EMA now at $61.46 with last month’s low at $60.05
  • The daily uptrend, line e, is now just above $59.
  • The daily relative performance broke through its resistance, line f, last month.
  • The daily OBV is still acting weaker than prices despite the spike in upside volume on October 19th.
  • The OBV has first resistance at line i with stronger at the downtrend, line h.
  • The weekly starc+ band is now at $65.80 with the monthly starc+ band at $69.27.

Tickers Mentioned: SPY, XLU, HON, LLL