Weekend Review and Watchlist

Overview

On the surface not a lot changed this week, the trend and overall breadth of the market remain strong, but drilling down into specific sectors and individual names, we saw many tech and momentum stocks declining 5% or more on Friday, as a rotation into financials, materials, and energy got underway.

The S&P made new all time highs on Friday, but finished lower for the week:-

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The Dow, NYSE Composite, and Russell, all finished at all time highs:-

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Damage was mostly confined to the NASDAQ, erasing last week's gains in Friday's session, with Technology -2.5% and Semis -3.8%.

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Bullish Sentiment in the AAII survey jumped to 5-week highs, while Bears were the lowest since February. Despite the sell-off in tech, the rotation into other sectors meant overall breadth remained strong, with the NYSE Cumulative Advance/Decline ending near its highs:-

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Sector Rankings

Some major changes in the sector rankings this week, and I should emphasize that although one day doesn't make a trend, with Friday's reversals in former leaders, and resurgence in former laggards, the interpretation of where each now stands will be highly dependent on your timeframe.

This week, Materials and Healthcare lead the way, both at new highs, followed by Industrials, just below its highs.

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They're followed by last week's leaders; Utilities and Consumer Staples, which eased back towards their 20-day EMA, and a resurgent Financials sector, which powered above its 20 and 50-day, and is now just 3% below its highs.

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Next comes Real Estate which remains rangebound, Consumer Discretionary, and Technology, both of which pulled back sharply from their respective highs earlier in the week.

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Energy, although still at the bottom, did enjoy a strong rally up to its 20 EMA, and there are already several names coming through on our watchlist.

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Alpha Capture Portfolio

Our model portfolio was -3.2% on the week vs -0.3% for the S&P. That decline came entirely in Friday's session which saw several holdings hit hard as tech and momentum/growth names finally came under pressure.

Our portfolio had rallied 10% over 8 weeks. It gave back 3% on Friday. This is what happens. This is the business we've chosen. The argument that leadership was narrow and the market was dependent on just a handful of overcrowded names was proven completely false with Friday's move alone. While FANG stocks and other recently strong names all pulled back hard, breadth improved and the Dow finished at an all time high while the S&P was unchanged.

We had two exits, and two new entries during the week, and this weekend have one exit, and two new entries for Monday. Those changes will leave us with 11 names, total open risk of 5.5%, and around 6% in cash.

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Watchlist

The rotation that took place towards the end of the week made itself known in our watchlist, as financials, industrials, and even energy names are now of greater interest at the expense of utilities, staples, tech, and consumer discretionary. Here's a sample from the full watchlist:-

$C

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$BK

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$EWBC

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$HIG

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$MPC

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Posted to Alpha Capture on Jun 11, 2017 — 1:06 PM

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