Written by Lance Roberts, Clarity Financial
Data Analysis Of The Market and Sectors For Traders
S&P 500 Tear Sheet
Performance Analysis
ETF Model Relative Performance Analysis
Sector & Market Analysis:
This past week, as noted above, the markets lost ground as concerns over legislative agenda arose. With the S&P 500 having broken its post-election uptrend, and the 50-dma, concerns over the stability of the current bull market are rising.
Utilities, Materials, Financials, Health Care and Technology were the best performers this week relative to the S&P 500 index itself but that’s not saying a whole lot outside of Utilities which caught the bulk of the “safety” trade.
Industrials, Discretionary, and Staples were weaker on a relative basis and remain below their respective 50-day moving averages putting each sector on “alert” status. While bullish trends remain intact, those trends are coming under attack so it is important to tighten up stop levels, watch sector rotation and leadership changes.
Energy despite a small bounce in the sector, the trends and backdrop remain sorely negative. Not only did oil prices not hold $48/bbl, energy stocks blasted to new lows last week and remain close to those lows currently. We continue to remain out of the sector entirely.
Small and Mid-Cap stocks remained weak but the sectors are now deeply oversold, we are looking for a failed bounce to exit positions and raise cash. The violation of monthly support suggests more trouble ahead, but we will opportunistically look for a reasonable exit.
Emerging Markets and International Stocks continue to hold support and money has been chasing performance in these sectors as of late. Continue to hold positions for now.
Gold – was unable to break out of its trading range last week and is once again very overbought. We will watch for further developments next week.
S&P Dividend Stocks, after adding some additional exposure recently we are holding our positions for now with stops moved up to recent lows. While the sector remained below its 50-dma it is currently holding support while having become oversold. We could be afforded an entry point if the market firms up.
Bonds and REIT’s continued to perform well last week as money rotated from “risk” into “safety.” Hold current positions for now.
Sector Recommendations:
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:
As noted above, while the overall bullish trend remains positive which keeps our portfolios allocated toward equity risk, the deterioration of the primary supports of the market remain concerning. While warnings are just that, a warning, it does suggest a bigger correction may be in the works over the next month, or so.
Stops have been raised to trailing support levels and we continue to look for ways to “de-risk” portfolios at this late stage of a bull market advance.
We remain invested but are becoming highly concerned about the underlying risk.
