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posted on 26 June 2017

Market And Sector Analysis 25 June 2017

Written by , Clarity Financial

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.

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


Performance Analysis

New! Thank you for all the comments on the performance analysis below. Due to many of the emails I got, I have swapped out the sector weight graph for a year-to-date performance range analysis. Keep the comments coming. (Email Me)

ETF Model Relative Performance Analysis


Sector Analysis

As opposed to the analysis above which drives longer-term market exposures, the following is a short-term trading perspective of sectors and markets

While Technology and Discretionary continued their recent weakness, both sectors are now testing their respective 50-dma’s. Discretionary is trying to breakdown while Technology has improved. The correction does set up a potential trading opportunity provided support holds. We will continue to monitor closely again next week.

Financials, Health Care, Materials, and Industrials maintained their lead this past week catching the money flows as investors rotated out of Tech and Discretionary. All of these sectors remain overbought so some profit-taking and rebalancing is advised. As noted last week:

Energy - Oil prices dropped below support at $45 on Friday and, and as expected, are now testing the lower range of $40/bbl. The supply of oil remains a problem with rig-counts rising and economic weakness setting in. With a major sector sell signal, and the cross of the 50-dma below the 200-dma, we remain out of the space for the time being.

Small and Mid-Cap stocks regained their respective 50-dma’s which removes their warning signs but remained weak relative to the broader market. This keeps concern elevated at the moment, however, maintain exposure for now, but do so cautiously with stops at support.

Emerging Markets and International Stocks as noted previously:

“There is a good bit of risk built into international stocks currently. We took profits a few weeks ago, but the recent extension suggests another round of rebalancing is likely wise. Take profits and rebalance sector weights but continue to hold these sectors but stop levels should be moved up to the 50-dma."

A pull back to support will provide an opportunity to rebalance holdings in the short-term.

Gold - The rally in Gold over the last couple of weeks once again failed at critical resistance at 1300/oz keeping us out of our long-term positions. Short-term trading positions were stopped out last week on the drop below $1260/oz for now. With Gold back below the 50-dma, caution remains advised with hard stops set on a break below $1240/oz or the 200-dma.

S&P Dividend Stocks regained key support levels last week after briefly breaking below their 50-dma. Last week, we recommended holding current positions which worked well as the rotation out of Technology and Discretionary found a home in dividend yielding stocks. Continue to hold current positions but maintain stops at the recent lows.

Bonds and REIT’s continued their advances this week breaking solidly above resistance. With the 50-dma’s moving upward, these sectors are attractive but extremely overbought. Wait for a pullback to add to exposures.

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.)

Portfolio Update:

The bullish trend remains positive, which keeps us allocated on the long side of the market for now.

Last week, during the correction, we added modestly to our core holdings for a second time this year. However, we are still maintaining slightly higher levels of cash currently, and still maintain “hedges" by being in areas that are traditionally “risk off" areas of the markets (Bonds, REITs, etc.) Those areas have enhanced returns this year on a total return basis.

We are currently holding positions in portfolios with near full exposure. We are going to rebalance some positions next week, like Health Care, which have had large run-ups in recent days.

As I stated last week:

“While I am not excited about the overall risk/return makeup of the market currently, as a portfolio manager it is the discipline and strategy that drives action. Everything else is secondary."

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