posted on 17 April 2017
Data Analysis Of The Market and Sectors For Traders
S&P 500 Tear Sheet
The "Tear Sheet" below is a "reference sheet" provide some historical context to markets, sectors, etc. and looking for deviations from historical extremes.
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The slow-motion correction that began back in March continued this past week and picked up steam as the break below the 50-dma occurred triggering a weekly sell-signal as discussed above.
The conditions currently present suggest a rally attempt over the next few days and any such attempt that fails to reclaim the 50-dma should be used to reduce portfolio risk.
Remain cautious currently as the "risk off" trade has continued to advance over the last week, again.
Technology, Healthcare, and Discretionary sectors continue to struggle with their respective 50-day moving averages. While still trending positively, relative performance has weakened substantially for now.
Energy continues to struggle after breaking its 50-dma and broke its 200-dma two weeks. While energy had a bit of a bounce last week, and tested resistance at the 50-dma, the bounce failed and the trend continues to materially weaken. Energy is very close to a major sector sell signal. Remain heavily underweight energy for the time being.
Materials, Financials, and Industrials have broken their 50-dma, as the "Trump Reflation Trade" has come to an end. With CPI contracting on Friday, the whole trade remains at risk. Underweight these sectors for now.
Bonds, Utilities, and Staples all continue to be the clear winners, which we were discussing back in January, as the Trump Trade was going to reverse. Those hedges have continued to perform well despite the weakness in other areas of the market.
Small and Mid-Cap stocks continued to weaken in terms of relative performance and have broken their respective 50-dma's. The deterioration of relative strength continues to suggest caution.
Emerging Markets, International, and Dividend Yielding Stocks are also showing weakness but remain in a bullish trend currently. Some profit taking and rebalancing is advised.
Bonds and REIT's got oversold three weeks ago and performance has continued to improve this past week. If the broad markets run into further trouble look for a continued rotation in the "safety trade." However, bonds are now very overbought so taking some profits and waiting for a correction to add further exposure makes sense.
The table below shows thoughts on specific actions related to the current market environment.
(These are not recommendations or solicitations to take any action. This is for informational purposes only related to market extremes and contrarian positioning within portfolios. Use at your own risk and peril.)
After hedging our long-equity positions 17-weeks ago with deeply out-of-favor sectors of the market (Bonds, REIT's, Staples, Utilities, Health Care and Staples) we did rebalance some of our long-term CORE equity holdings back to original portfolio weightings harvesting a bit of liquidity.
While the bullish trend is still positive, which keeps us allocated on the long-side of the market, the weekly "sell signal" alert is not being dismissed.
Any rally next week that "fails" to but the market back onto more solid footing will be used to reduce risk in portfolios to some degree and rebalance back to target weightings.
As noted last week:
We continue to maintain very tight trailing stops as the mid to longer-term dynamics of the market continue to remain very unfavorable.
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