BE CAREFUL WHICH SECTORS YOU CHOOSE AS A HIDING PLACE

By Jeffrey Marcus | May 27, 2022

BE CAREFUL WHICH SECTORS YOU CHOOSE AS A HIDING PLACE

There is a huge discrepancy in performance between the winners and losers in 2022. Whether driven by previous unjustified run-ups, geopolitical variables or Covid derived shortages and logistical issues, these performance number differences are huge and historically significant. We have found two things to be true regarding markets, patterns normally go further than one would expect and no pattern lasts forever. Clients should be careful not to stay too long.

The table below shows YTD and 1 year performance for the U.S. stock sector winners and losers. For a number of the sectors the 2022 performance differential is close to 100%. This is an extreme by any historic standards (see the 2 relative performance charts below).

RRG (Relative Rotation Graph) analysis shows that things may be about to change. Energy and Materials sectors, which have been outliers in terms of relative strength and RS momentum have been losing RS momentum rapidly. These areas of the market are now overbought and showing weakness. The opposite is occurring for TECH sectors like Internet, Cloud Computing, and Social Media. These oversold sectors are showing positive RS momentum.

Clients should be careful that they do not get complacent hiding in corners of the market that have proven to be safe so far.

, BE CAREFUL WHICH SECTORS YOU CHOOSE AS A HIDING PLACE
, BE CAREFUL WHICH SECTORS YOU CHOOSE AS A HIDING PLACE

Relative Rotation Graphs (RRG) – explanation video

RRG – written explanation

, BE CAREFUL WHICH SECTORS YOU CHOOSE AS A HIDING PLACE
, BE CAREFUL WHICH SECTORS YOU CHOOSE AS A HIDING PLACE

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Jeff Marcus founded Turning Point Analytics (TPA) in 2009 after 25 years on trading desks and 13 years as a head trader to provide strategic and technical research to institutional clients. Turning Point Analytics (TPA) provides a unique strategy that works as an overlay to clients’ good fundamental analysis. After 10 years of serving only large institutions, TPA now offers its research services to mid and small managers, RIA’s, and wealthy sophisticated individuals looking for a way to increase their returns and outperform their peers.

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2022/05/27
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