Apr 17

Weekend Review and Watchlist

Overview

After a brief reversal Monday, the S&P rallied strongly midweek to fresh recovery highs and held its ground thereafter to end the week with a 1.6% gain.

The reservations many commentators have had over this rally are slowly and steadily disappearing as ever higher levels are achieved. Whether it’s some other index or group of stocks not confirming, lack of volume, or leadership and breadth being too thin (the NYSE advance/decline is now at all time highs), one by one this advance is overcoming them all.

The final line in the sand is of course the all time highs of nearly a year ago which are now just 2.4% away. We’ve been here before however. It’s easy to forget that in December we came within 1% of all time highs and had many high-profile names staging impressive breakouts, including all four FANG stocks, before the January decline took hold in a vicious move. Fortunately we don’t need to wait for all time highs to participate again, instead we’ve been taking new entry signals for individual stocks since they first started triggering in February and March. Whether this move ends with another brutal reversal to new lows, or continues to new highs (or even something completely different), only time will tell.

This week the notable feature for me was the Russell 2000 ($RUT) which finished above its 40-week MA for the first time since last July, joining the other major indices (Dow, S&P, NASDAQ, Transports, Midcap) and leaving only the Microcap Index yet to do so. It’s also started to show strength on a relative basis, as seen on the second chart comparing it to the S&P.

 

Sector Analysis

The sector rankings this week reflect the shift that’s taking place. I have Technology ($XLK) and Industrials ($XLI) as the leading pair, with the more defensive Staples ($XLP) and Utilities ($XLU) slipping to third and fourth place.

 

Then comes Materials ($XLB) and Consumer Discretionary ($XLY) which continue to improve strongly:-

 

They’re followed by Energy ($XLE), Healthcare ($XLV), and Financials, which are all toying with their 200-day MA.

What should be apparent here is that even the worst sectors on a relative basis are still in the midst of a strong recovery, and it’s the more defensive former leaders of staples and utilities that are now starting to wane. Breadth is improving, the NYSE A/D is at all time highs, and the major indices are just shy of all time highs. You’d need to have one hell of an entrenched subjective view to still be on the sidelines painting this action as negative.

Away from the Sector SPDRs it’s worth reiterating gold miners continue to act well in contrast to other supposed defensive sectors. While Gold ($GLD) retreated to its 50-day, the Gold Miners ($GDX) rallied to fresh highs.

 

Alpha Capture Portfolio

Our portfolio gained 0.5% this week vs 1.6% for the S&P, and is now -3.5% YTD. We continue to take new entry signals as they present themselves, with a further three signals this week, and we have an additional signal this weekend which brings us up to 14 open positions with 10% remaining in cash.

SUBSCRIBE FOR NEW PORTFOLIO SIGNALS, ADDITIONAL TRADE IDEAS, AND A COMPLETE WATCHLIST.

 

Watchlist

As discussed earlier, utilities, consumer goods and staples are on the wane, and we’re seeing more strength in industrials, technology, energy, and specific areas within healthcare like medical equipment.

Here’s a sample from the full list of 25 names:-

$HON

 

$RTN

 

$XOM

 

$APA

 

$ALGN

 

$RMD

 

$AMAT

 

$NVDA

SUBSCRIBE FOR NEW PORTFOLIO SIGNALS, ADDITIONAL TRADE IDEAS, AND A COMPLETE WATCHLIST.

 

 

 

 

 

 

Apr 09

Weekend Review and Watchlist

Overview

With the S&P pulling back 1.2% this week it was the largest weekly decline since the market made its lows in February. But let’s keep things in context. Given the advance we’ve had since then, this is currently looking like a relatively modest consolidation, and as we’ll see later there were some further encouraging signs in terms of individual stock in our portfolio, and sectors overall.

 

Sector Analysis

I often retweet the summary of all time highs that @361Capital compiles each day, and unless you’ve been living under a rock you’ll know that for the longest time it’s pretty much been utilities, consumer staples, and REITS consistently making up most of the list. This week was no exception, but it would be a mistake in my opinion to think that it’s only ‘defensive’ sectors leading the market and surmise it must therefore mean we’re just witnessing a bear market rally that’s destined to fail. Instead, breadth continues to improve.

Of the nine S&P Sector SPDRs, Consumer Staples ($XLP) and Utilities ($XLU) are indeed still the leading pair, but not without the latter first undergoing a quick test of its 20 EMA midweek.

 

Hot on their heels is Technology ($XLK), followed by Industrials ($XLI), Consumer Discretionary ($XLY), and Materials ($XLB), all of which are toying with their 20 EMA but above their 200-day.

 

Even Healthcare ($XLV) and Energy ($XLE) improved markedly to test the underside of their 200-day MAs for the first time this year.

 

That only leaves Financials ($XLF) which are now bottom of the pile.

 

Beyond the Sector SPDRs, Biotech ($IBB) picked up where it left off last week and followed through strongly.

 

I’ve mentioned on numerous occasions the ongoing strength in gold miners and the potential for further upside, even when Gold itself or $GLD had pulled back, and we saw that illustrated again this week with $GDX powering ahead to fresh highs.

 

Alpha Capture Portfolio

This week our portfolio edged lower -0.25% vs -1.21% for the S&P which takes it to -3.95% YTD.

We had four new entries and one exit, which brings us up to ten open positions, total open risk of just under 5%, and 35% in cash. All but one of our current holdings are at or just below their highs.

SUBSCRIBE FOR NEW PORTFOLIO SIGNALS, ADDITIONAL TRADE IDEAS, AND A COMPLETE WATCHLIST.

 

Watchlist

Our list this week again has some strong representation from industrial and technology sectors, as well as staples and a few select consumer discretionary stocks. Here’s a sample from the full list of 25 names:-

$HON

 

$RTN

 

$GGG

 

$ITW

 

$AUY

 

$AMAT

 

$NVDA

 

$MCD

SUBSCRIBE FOR NEW PORTFOLIO SIGNALS, ADDITIONAL TRADE IDEAS, AND A COMPLETE WATCHLIST.

 

 

 

 

 

 

 

 

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