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posted on 05 December 2016

Market Sector Analysis: 04 December 2016

Written by , Clarity Financial

Data Analysis Of The Market & Sectors For Traders


S&P 500 Tear Sheet

Thank you for your recent suggestions. We are working on adding some momentum indicators to the tear sheet.

If you have any suggestions or additions you would like to see, send me an email.

spy-tearsheet-120216


Sector Analysis

Comments

While the markets seemed to rally broadly last week, such was really not the case when we looking at individual areas. While Financials led the charge, on hopes that Trump will repeal “Dodd-Frank" allowing banks to once again “run amok;" Small and Mid-cap stocks, Energy (on oil cut deal from OPEC) and Industrials outperformed the index as well. The problem, as stated above, is that a stronger dollar and higher interest rates will likely hamper this optimism sooner rather than later. This is particularly the case with Small and Mid-Cap companies that are the most susceptible to monetary tightening.

(Note: I have changed the sector and major market analysis charts to a 50/200 DMA crossover signal and embedded an overbought/sold indicator.)

sector-chart1-120216

sector-chart2-120216

sector-analysis-table-120216

Relative performance of each sector of the model as compared to the S&P 500 is shown below. The table compares each position in the model relative to the benchmark over a 1, 4, 12, 24 and 52-week basis. Historically speaking, sectors that are leading the markets higher continue to do so in the short-term and vice-versa. The relative improvement or weakness of each sector relative to index over time can show where money is flowing into and out of. Normally, these performance changes signal a change that lasts several weeks.

sarm-relativeperformance-120216

Utilities, REIT’s, Staples, Bonds, Gold, and Healthcare have remained under pressure this past week. While Basic Materials, Financials, Industrials and Energy are beginning to push extremes.

Importantly, notice the cluster of assets that are grossly underperforming the S&P 500 currently. THIS DOES NOT LAST LONG and tends to historically lead to rather swift reversions in the trade. Everything is currently pointing to this being the case so profit taking and rebalancing is strongly advised.

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