Auto sector stocks reflected in Dow Jones US Autos and Parts pop on open

A weekly chart of the Dow Jones US Autos and Parts ($DWCAUP) shows major segments of the auto stock sector following the general market’s downward direction; in this case, testing the 40 week moving average, but rising on Wednesday morning‘s open as noted on the daily chart.
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Most stocks rose on the open with the $DWCAUP, like Toyota, Honda and Ford, but GM was still languishing below 30 after 20 minutes into the open.

Be apprised the Dow Jones US Autos and Parts ($DWCAUP) is not a true index, but it is the only collection of auto-related stocks in a single basket available to stock investors.

Fact is, there is not even an exchange traded fund or ETF to represent auto sector stocks.

Still, major auto stocks and parts companies are reflected in the $DWCAUP. In the weekly chart, the high for the basket of stocks occurred this last January at 2898.57. It closed yesterday at 2559 level, a decline of 11.3 percent. This morning, though, the index popped to the upside to 2580 after 20 minutes of the New York open.

So, if you own General Motors (GM), Ford (F), Toyota Motor Company (symbol TM), Honda Motor company (HMC), Tesla (TSLA), Daimler US (DDAIF). Nissan (NSANY), Volkswagen (VLKAY), Tata Tata Motors (TTM), be apprised that other supplier types are also included in the $DWCAUP), like Spartan Motors (SPAR).

Note all of these can be tracked at MarketWatch.com as well as finance.yahoo.com.

Should you invest in the auto sector this point? Only you can answer that, but be apprised that the general market is having its sway over trading these days. Furthermore, aside from the obvious technicals of the chart, like the 40 week moving average as initial support there is a host of fundamental issues to consider.

First, consider the Fed is closer to the end of QE2 than at the beginning. This Quantitative Easing may indeed end slowly over the rest of the year, but it will surely end. And even the hint of it slowing will affect the general market which will affect the auto stock sector.

Think about it. We’ve had historically low interest rates since the fall in 2008, but we still have high unemployment. Many believe it is QE2 that spawned the commodity bull market, including rises in both gold and silver. What will happen when Bernanke and company turn off the easy money spigot? Will it affect the economy to such a degree the auto sector stock might be drastically affected, at least until all things settle down?

Second, consider the rising cost of oil and it derivative, gasoline. No wind power can match the energy potential of oil, natural gas and gasoline. Although the end of QE2 might bring that down somewhat, we passed peak easy oil as a supply decades ago. This world may never see $40 oil again in the remain of our lifetime.

Third, the US dollar has been falling at a faster clip ever since QE2 started. Only a return to rational thinking and money management by the US government can even begin to curb it; and first on that agenda has to be control over the deficit.

Bottom line is, the general market follows all of those factors. And the auto sector goes along for the ride on its tail.

Disclosure: Frank Sherosky, creator of the chart and author of "Awaken Your Speculator Mind" does not hold any stock or option positions in this equity at this time.

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About the Author: After 39 years in the auto industry as a design engineer, Frank Sherosky now trades stocks and writes articles, books and ebooks via authorfrank.com, but may be contacted here by email: [email protected]

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