Tag Archives: Portfolio Management

Sector Buy/Sell Review: 10-20-20

HOW TO READ THE SECTOR BUY/SELL REVIEW: 10-20-20

Each week we produce a “Sector Buy/Sell Review” chartbook of the S&P 500 sectors to review where the money is flowing within the market as a whole. Such helps refine decision-making about what to own and when. It also guides what sectors to overweight or underweight to achieve better performance.

You can also view sector momentum and relative strength daily here.

There are three primary components to each chart below:

  • The price chart is in orange.
  • Over Bought/Over Sold indicator is in gray in the background.
  • The Buy / Sell indicator is in blue.

When the gray indicator is at the TOP of the chart, there is typically more risk and less reward available at the current time. In other words, the best time to BUY is when the short-term condition is over-sold. Likewise, when the buy/sell indicator is above the ZERO line, investments tend to work better than when below the zero lines.

SECTOR BUY/SELL REVIEW: 10-20-20

Basic Materials

  • XLB held support and bounced off the 50-dma surging back to its previous highs. There is now a double-top with a more extreme overbought condition. 
  • Take profits on trading positions and look for a correction back to support to increase sizing.
  • Momentum is good, but it is still underperforming the market as a whole.
  • Keep stops on trading positions at the 50-dma. 
  • Short-Term Positioning: Bullish
    • Last Week: No Positions
    • This Week: Hold Positions
    • Stop-Loss moved up to $62
  • Long-Term Positioning: Bullish

Communications

  • Communications is continuing to flirt with its 50-dma support level. 
  • The uptrend remains intact, but XLC is underperforming the broad market while working off its overbought condition. This will likely provide a good setup for a trade post-election, but keep stops in place for now. 
  • Stops remain at $58.
  • Short-Term Positioning: Bullish
    • Last Week: Hold positions
    • This Week: Hold positions
  • Long-Term Positioning: Bullish

Energy

  • Energy did bounce off of recent lows but failed to do much with it. Energy is massively underperforming the broad index and will retest recent lows. 
  • The lows must hold, or XLE is going to retest the March lows. 
  • The overall trend is fragile, remain clear for now.
  • Short-Term Positioning: Bearish
    • Last week: Hold positions
    • This week: Hold positions.
  • Stop-loss violated.
  • Long-Term Positioning: Bearish

Financials

  • Financials continue to underperform, and the “earnings bounce” has now reversed.
  • XLF is testing it’s 50- and 200-dma with a “Golden Cross” now in place. If XLF can hold support and rally, there is a decent upside for the sector. A failure at support will be very disappointing. 
  • We saw the same bounce last quarter that eventually failed, but there wasn’t a positive bias to the moving averages. So, give financials a little breathing room. 
  • We are still avoiding the sector for now, but we will add holdings to our portfolios if support holds and performance improves.
  • Short-Term Positioning: Neutral
    • Last week: No position
    • This week: No position
  • Long-Term Positioning: Neutral

Industrials

  • XLI has rallied sharply and is back to extreme overbought levels and extensions.
  • We are holding our exposure for now, but take profits and rebalance risks as needed. 
  • XLI is pushing back up into the 3-standard deviations of the 50-dma and is underperforming the S&P. 
    • Short-Term Positioning: Bullish
    • Last week: No change.
    • This week: No change.
  • Long-Term Positioning: Bullish

Technology

  • Technology stocks and the Nasdaq failed at a lower high than previous, which is concerning. 
  • The sector is back to very overbought and is now running into the previous resistance. 
  • Beware of short-term risks, but the 50-dma is holding for now. 
  • Short-Term Positioning: Bullish
    • Last week: No changes.
    • This week: Hold positions
  • Stop-loss moved up to $110
  • Long-Term Positioning: Bullish

Staples

  • XLP has exploded higher over the week and went back into extreme overbought territory. The correction on Monday was not surprising. 
  • The sector is back to very overbought and well above the 50-dma, so more correction is likely. 
  • Rebalance holdings and tighten up stop-losses.
  • We are moving our stop-loss alert to $62 as our stop-level.
  • Short-Term Positioning: Bullish
    • Last week: Hold positions
    • This week: Hold positions.
  • Long-Term Positioning: Bullish

Real Estate

  • Last week, XLRE rallied back into previous resistance. On Monday, the sell-off took it back below the 50-dma. 
  • Last week, we noted that XLRE was very overbought and extended with multiple tops providing resistance at current levels. That resistance proved to be too formidable for now. 
  • Move stop-losses up to the 200-dma.
  • Short-Term Positioning: Neutral
    • Last week: No change.
    • This week: Hold positions.
  • Long-Term Positioning: Bullish

Utilities

  • XLU had been struggling with resistance at the 200-dma. However, XLU surged back to extremely overbought conditions after breaking above resistance. 
  • XLU is now 4-standard deviations above the moving average. 
  • Take profits and rebalance risk. 
  • Short-Term Positioning: Neutral
    • Last week: Reduced XLRE by 50%.
    • This week: Hold positions
  • Long-Term Positioning: Bullish

Health Care

  • XLV is sitting on its 50-dma and needs to hold here. 
  • The previous overbought conditions have been resolved and are still intact. Use weakness to add to holdings.
  • The 200-dma is now essential price support for XLV.
  • We are moving our absolute stop to $100
  • Short-Term Positioning: Bullish
    • Last week: Hold positions
    • This week: Hold positions
  • Long-Term Positioning: Bullish

Discretionary

  • XLY rallied back to new highs last week after we added exposure and is extremely extended. 
  • Take profits and rebalance risk. The 50-dma is an important initial support. 
  • Stop-loss moved to $140
  • Short-Term Positioning: Bullish
    • Last week: No changes.
    • This week: No changes.
  • Long-Term Positioning: Bullish

Transportation

  • Transportation has been rallying on hopes from infrastructure but failed at its previous highs. 
  • The sector is overbought and ran into previous resistance. 
  • The “buy signal” remains very extended. Much of the sector also maintains relatively weak fundamentals. 
  • We took profits in the sector and are waiting for a better entry point to add to our holdings.
  • Maintain an absolutely stop-loss at $56
  • Short-Term Positioning: Neutral
    • Last week: No change
    • This week: No change
  • Long-Term Positioning: Neutral

Sector Buy/Sell Review: 10-13-20

HOW TO READ THE SECTOR BUY/SELL REVIEW: 10-13-20

Each week we produce a “Sector Buy/Sell Review” chartbook of the S&P 500 sectors to review where the money is flowing within the market as a whole. Such helps refine decision-making about what to own and when. It also guides what sectors to overweight or underweight to achieve better performance.

You can also view sector momentum and relative strength daily here.

There are three primary components to each chart below:

  • The price chart is in orange.
  • Over Bought/Over Sold indicator is in gray in the background.
  • The Buy / Sell indicator is in blue.

When the gray indicator is at the TOP of the chart, there is typically more risk and less reward available at the current time. In other words, the best time to BUY is when the short-term condition is over-sold. Likewise, when the buy/sell indicator is above the ZERO line, investments tend to work better than when below the zero lines.

We added 2- and 3-standard deviation extensions from the 50-dma this week. Currently, markets and sectors are back to “stupid” overbought on many levels. We advise caution.

SECTOR BUY/SELL REVIEW: 10-13-20

Basic Materials

  • Looking at XLB, you will see the same in Industrials and Transportation, which bounced on Monday, but there hasn’t been enough correction in the sector for a good entry point. 
  • While XLB held support and bounced off the 50-dma, it has been underperforming over the last few trading sessions and is back to 3-standard deviations. 
  • Be patient for a pullback to add to holdings. 
  • Keep stops on trading positions at the 50-dma. 
  • Short-Term Positioning: Bullish
    • Last Week: No Positions
    • This Week: Added to our XLB position.
    • Stop-Loss moved up to $60
  • Long-Term Positioning: Bullish

Communications

  • Communications also jumped on Monday, as the sector bounced from the previous sell-off.
  • XLC did regain the 50-dma, so trading positions are still intact. 
  • Traders can use pullbacks to the 50-dma to add positions with a very tight stop at $56.
  • Short-Term Positioning: Bullish
    • Last Week: Added to holdings.
    • This Week: Hold positions
  • Long-Term Positioning: Bullish

Energy

  • As we noted last week: “Energy is deeply oversold and due for a bounce. However, there is not much support for the sector currently.” 
  • The sector did bounce on Monday…but barely. Furthermore, bounces are not holding. 
  • The overall trend is fragile, remain clear for now.
  • Short-Term Positioning: Bearish
    • Last week: Hold positions
    • This week: Hold positions.
  • Stop-loss violated.
  • Long-Term Positioning: Bearish

Financials

  • Financials continue to underperform but did bounce on Monday in anticipation of earnings.
  • We saw the same bounce last quarter that eventually failed. 
  • We are still avoiding the sector for now. 
  • Short-Term Positioning: Neutral
    • Last week: No position
    • This week: No position
  • Long-Term Positioning: Neutral

Industrials

  • As noted, like materials, XLI rallied sharply on Monday under the premise of more fiscal support. 
  • We added to our exposure previously and are holding for now. 
  • XLI is pushing back up into the 3-standard deviations of the 50-dma and is underperforming the S&P. 
  • We will likely take profits and rebalance risk. 
    • Short-Term Positioning: Bullish
    • Last week: No change.
    • This week: No change.
  • Long-Term Positioning: Bullish

Technology

  • Technology stocks and the Nasdaq found some buying yesterday as an apparent short-squeeze fueled the FANG stocks’ rally. 
  • The sector is back to very overbought and is now running into the previous resistance. 
  • Sector investors will likely chase for now as the momentum trade continues. 
  • Short-Term Positioning: Bullish
    • Last week: No changes.
    • This week: Hold positions
  • Stop-loss set at $105
  • Long-Term Positioning: Bullish

Staples

  • XLP has exploded higher over the last couple of trading sessions.
  • While the rally did underperform the broad market, the sector is back to very overbought and is pushing into 3-standard deviation territory. 
  • Rebalance holdings and tighten up stop-losses.
  • We are moving our stop-loss alert to $62 as our stop-level.
  • Short-Term Positioning: Bullish
    • Last week: Hold positions
    • This week: Hold positions.
  • Long-Term Positioning: Bullish

Real Estate

  • On Monday, XLRE rallied back into previous resistance. Such is likely a good time to take profits and rebalance this sector. 
  • XLRE is very overbought and extended with multiple tops providing resistance at current levels.
  • Short-Term Positioning: Neutral
    • Last week: No change.
    • This week: Hold positions.
  • Long-Term Positioning: Bullish

Utilities

  • XLU had been struggling with resistance at the 200-dma. However, over the last couple of sessions, and opposed to the 10-year yield rising, XLU has surged back to very overbought conditions.
  • XLU is now 4-standard deviations above the moving average. 
  • Take profits and rebalance risk. 
  • Short-Term Positioning: Neutral
    • Last week: Hold positions
    • This week: Reduce XLU by 50%.
  • Long-Term Positioning: Bullish

Health Care

  • XLV broke below its 50-dma but held support and has now blasted higher into an extreme overbought and deviated condition. 
  • We stated previously; there was an opportunity to add exposure, which we did. 
  • The 200-dma is now essential price support for XLV.
  • We are moving our absolute stop to $100
  • Short-Term Positioning: Bullish
    • Last week: Hold positions
    • This week: Hold positions
  • Long-Term Positioning: Bullish

Discretionary

  • XLY corrected back to the 50-dma, where we added exposure to our portfolio. 
  • On Monday, the sector rallied but underperformed the market as a whole. 
  • The sector is back to extreme overbought and is now pushing into 3-standard deviation territory. Look to take profits and rebalance. 
  • Stop-loss moved to $140
  • Short-Term Positioning: Bullish
    • Last week: No changes.
    • This week: No changes.
  • Long-Term Positioning: Bullish

Transportation

  • Transportation, like Materials, has been rallying on hopes from infrastructure. That is a long-shot.
  • The sector is not overbought but is running into previous resistance.
  • The “buy signal” remains very extended. Much of the sector also maintains relatively weak fundamentals. 
  • We took profits in the sector and are waiting for a better entry point to add to our holdings.
  • Maintain an absolutely stop-loss at $56
  • Short-Term Positioning: Neutral
    • Last week: No change
    • This week: No change
  • Long-Term Positioning: Neutral

Sector Buy/Sell Review: 10-06-20

HOW TO READ THE SECTOR BUY/SELL REVIEW: 10-06-20

Each week we produce a “Sector Buy/Sell Review” chartbook of the S&P 500 sectors to review where the money is flowing within the market as a whole. Such helps refine decision-making about what to own and when. It also guides what sectors to overweight or underweight to achieve better performance.

You can also view sector momentum and relative strength daily here.

There are three primary components to each chart below:

  • The price chart is in orange.
  • Over Bought/Over Sold indicator is in gray in the background.
  • The Buy / Sell indicator is in blue.

When the gray indicator is at the TOP of the chart, there is typically more risk and less reward available at the current time. In other words, the best time to BUY is when the short-term condition is over-sold. Likewise, when the buy/sell indicator is above the ZERO line, investments tend to work better than when below the zero lines.

We added 2- and 3-standard deviation extensions from the 50-dma this week. Currently, markets and sectors are back to “stupid” overbought on many levels. We advise caution.

SECTOR BUY/SELL REVIEW: 10-06-20

Basic Materials

  • As stated last week, the “relation trade” is likely over. More importantly, with 10-year Treasury yields popping higher recently, such will put a crimp on economic growth.
  • Looking at XLB, you will see the same in Industrials and Transportation, which bounced on Monday, but there hasn’t been enough correction in the sector for a good entry point.
  • The relative performance has also weakened, which keeps us cautious.
  • Trading positions are reasonable with a stop at the 50-dma and profit-taking at previous highs. 
  • Short-Term Positioning: Bullish
    • Last Week: No Positions
    • This Week: Trading positions only. 
    • Stop-Loss moved up to $60
  • Long-Term Positioning: Bearish

Communications

  • Communications also bounced on Monday, as the sector had become oversold short-term.
  • We suggested taking profits and reducing risks, and that correction has now happened. 
  • XLC did regain the 50-dma, so trading positions are still intact. 
  • Traders can add positions with a very tight stop at $56.
  • Short-Term Positioning: Bullish
    • Last Week: Hold positions
    • This Week: We added to communications last week. 
  • Long-Term Positioning: Bearish

Energy

  • As we noted last week: “Energy is deeply oversold and due for a bounce. However, there is not much support for the sector currently.” 
  • The sector did bounce on Monday. However, it has done little to change the overall trend or establish a bottom at this point. Stay clear for now. 
  • Short-Term Positioning: Bearish
    • Last week: Hold positions
    • This week: Hold positions.
  • Stop-loss violated.
  • Long-Term Positioning: Neutral

Financials

  • Financials continue to underperform and remain a sector to avoid currently.
  • XLF bounced yesterday on hopes of more fiscal stimulus but was weak relative to the index.
  • Financials remain constrained by the 200-dma. Earnings start next week, so that will be their best chance to break out. 
  • Banks remain out of favor. 
  • Short-Term Positioning: Neutral
    • Last week: No position
    • This week: No position
  • Long-Term Positioning: Bearish

Industrials

  • As noted, like materials, XLI rallied sharply on Monday under the premise of more fiscal support. Such could be disappointing. 
  • We have grossly reduced our exposure to the sector and are looking for a better opportunity to add back to our position. We haven’t seen an excellent oversold entry point yet.
  • As suggested previously, take profits and rebalance risk. 
    • Short-Term Positioning: Bullish
    • Last week: No change.
    • This week: No change.
  • Long-Term Positioning: Bearish

Technology

  • Technology stocks, and the Nasdaq, found some buying yesterday after a fairly brutal correction over the last couple of weeks. 
  • While the sector remains has worked off some of its overbought condition, it is now running into the previous uptrend resistance. 
  • Such is still the sector investors will likely chase for now as the momentum trade continues. 
  • Short-Term Positioning: Bullish
    • Last week: No changes.
    • This week: Added to our Technology holdings.
  • Stop-loss set at $105
  • Long-Term Positioning: Bullish

Staples

  • Over the last couple of weeks, we have discussed the correction of XLP. 
  • That correction came and has pushed XLP down to its 50-dma, where it did hold support. 
  • However, the rally yesterday was a bit disappointing relative to the index. 
  • Rebalance holdings and tighten up stop-losses on any rally for now.
  • The sector has gotten oversold enough for a rally, but we need to see relative performance improve.
  • We are moving our stop-loss alert to $60 as our stop-level.
  • Short-Term Positioning: Bullish
    • Last week: Hold positions
    • This week: Hold positions.
  • Long-Term Positioning: Bullish

Real Estate

  • There is still a lot of risk to the real estate space, specifically in the Commerical side. However, investors are back to chasing the yield and ignoring the danger. 
  • On Monday, XLRE rallied back above resistance and is now testing its previous resistance. Such is a good time to take profits and rebalance this sector. 
  • With XLRE oversold, use rallies to rebalance exposures and make sure you are in the right REIT areas. 
  • Short-Term Positioning: Neutral
    • Last week: No change.
    • This week: Hold positions.
  • Long-Term Positioning: Bullish

Utilities

  • XLU had been struggling with resistance at the 200-dma. However, over the last couple of sessions, and opposed to the 10-year yield rising, XLU has surged back to very overbought conditions.
  • Performance has been disappointing, so take profits and rebalance accordingly. 
  • Short-Term Positioning: Neutral
    • Last week: Hold positions
    • This week: Hold positions.
  • Long-Term Positioning: Bullish

Health Care

  • XLV broke below its 50-dma but recovered it on Monday, keeping support intact. 
  • We stated previously; there was an opportunity to add exposure, which we did. 
  • The 200-dma is now essential price support for XLV.
  • We are moving our absolute stop to $100
  • Short-Term Positioning: Bullish
    • Last week: Hold positions
    • This week: Added to Healthcare holdings.
  • Long-Term Positioning: Bullish

Discretionary

  • XLY has corrected back to its 50-dma and is holding support for now. 
  • On Monday, the sector rallied but underperformed the market as a whole. 
  • The sector has not gotten oversold yet, which suggests a limit to the upside at the moment. 
  • Without more fiscal support, the money flows into discretionary stocks could well see some weakness.
  • Stop-loss moved to $135
  • Short-Term Positioning: Bullish
    • Last week: No changes.
    • This week: No changes.
  • Long-Term Positioning: Neutral

Transportation

  • Transportation rallied on Monday, but that rally underperformed other sectors of the market.
  • The sector is not oversold, and the “buy signal” remains very extended. Much of the sector also maintains relatively weak fundamentals. 
  • We took profits in the sector and are waiting for a better entry point to add to our holdings.
  • Maintain an absolutely stop-loss at $56
  • Short-Term Positioning: Neutral
    • Last week: No change
    • This week: No change
  • Long-Term Positioning: Bearish

Sector Buy/Sell Review: 09-22-20

HOW TO READ THE SECTOR BUY/SELL REVIEW: 09-22-20

Each week we produce a “Sector Buy/Sell Review” chartbook of the S&P 500 sectors to review where the money is flowing within the market as a whole. Such helps refine decision-making about what to own and when, but what sectors to overweight or underweight to achieve better performance.

You can also view sector momentum and relative strength daily here.

There are three primary components to each chart below:

  • The price chart is in orange.
  • Over Bought/Over Sold indicator is in gray in the background.
  • The Buy / Sell indicator is in blue.

When the gray indicator is at the TOP of the chart, there is typically more risk and less reward available at the current time. In other words, the best time to BUY is when the short-term condition is over-sold. Likewise, when the buy/sell indicator is above the ZERO line, investments tend to work better than when below the zero lines.

We added 2- and 3-standard deviation extensions from the 50-dma this week. Currently, markets and sectors are back to “stupid” overbought on many levels. We advise caution.

SECTOR BUY/SELL REVIEW: 09-22-20

Basic Materials

  • A common theme through today’s update is the exit of the “reflation” trade. Markets had been hoping for additional “fiscal support” from Congress. However, with the election looming, a need for a budget negotiation to avoid a “shutdown,” and now a battle over replacing a Supreme Court Justice, the odds of a fiscal deal getting done is minuscule.
  • Looking at XLB, the sell-off yesterday was the reflection of the exit of the reflation trade. You will see the same in Industrials and Transportation, which were all down more than 3%. 
  • The setup for the sell-off was present, as noted last week, “with XLB pushing into very overbought conditions with a historically high ‘buy signal,’ there seems to be a lot less reward in the sector currently. It isn’t advisable to chase the sector now. Look to buy on dips and short-term oversold conditions.”
  • That opportunity is coming but still has more work to do first.
  • Short-Term Positioning: Bullish
    • Last Week: No Positions
    • This Week: No Positions
    • Stop-Loss moved up to $60
  • Long-Term Positioning: Bearish

Communications

  • The correction in communications continued on Monday, but the sector has become oversold short-term.
  • We suggested taking profits and reducing risks, and that correction has now happened. 
  • XLC did fail to hold the 50-dma and has become oversold. Look for a bounce into resistance to reduce exposure and take profits if needed. 
  • Adding a trading position is possible with a very tight stop at $56.
  • Short-Term Positioning: Bullish
    • Last Week: Hold positions
    • This Week: Hold positions
  • Long-Term Positioning: Bearish

Energy

  • Energy continues to fail. We were stopped out of our XOM position previously.
  • Energy is deeply oversold and due for a bounce. However, there is not much support for the sector currently, particularly if we get a dollar rally, which we see some early signs.
  • With supports taken out, there is no reason to add exposure here. Wait for a bottom to form and the sector to show some signs of life first.
  • Short-Term Positioning: Bearish
    • Last week: Hold positions
    • This week: Hold positions.
  • Stop-loss violated.
  • Long-Term Positioning: Neutral

Financials

  • Financials continue to underperform and remain a sector to avoid currently.
  • XLF sold off yesterday on news of massive money laundering and the realization no more financial support is coming. 
  • The sell-off yesterday violated support and confirms the failure of the 200-dma. 
  • Banks remain out of favor. 
  • Short-Term Positioning: Neutral
    • Last week: No position
    • This week: No position
  • Long-Term Positioning: Bearish

Industrials

  • As noted, like materials, XLI sold off sharply on Monday under the premise of no more fiscal support, which will kill the economic reflation trade. 
  • We have grossly reduced our exposure to the sector and are looking for a better opportunity to add back to our position. We may finally get that opportunity closer to $72.
  • As suggested previously, take profits and rebalance risk. 
    • Short-Term Positioning: Bullish
    • Last week: No change.
    • This week: No change.
  • Long-Term Positioning: Bearish

Technology

  • Technology stocks, and the Nasdaq, found some buying yesterday after a fairly brutal correction over the last couple of weeks. 
  • While the sector remains overbought and extended well above long-term averages, the index should try to find short-term support. 
  • The risk remains to the downside for now. But with the “reflation” trade taking a hit, the money will likely flow back into the “previous winners” for now. 
  • Short-Term Positioning: Bullish
    • Last week: No changes.
    • This week: No changes.
  • Stop-loss set at $105
  • Long-Term Positioning: Bullish

Staples

  • Over the last couple of weeks, we have discussed the correction of XLP. 
  • That correction came and has pushed XLP down to its 50-dma. It needs to hold support here and is getting sufficiently oversold enough to do that. 
  • However, we need to see buyers begin to step in. 
  • Rebalance holdings and tighten up stop-losses on any rallies for now. We are likely not “out of the woods,” just yet. 
  • We are moving our stop-loss alert to $60 as our stop-level.
  • Short-Term Positioning: Bullish
    • Last week: Hold positions
    • This week: Hold positions
  • Long-Term Positioning: Bullish

Real Estate

  • Another aspect of the “reflation” trade was also in XLRE. Without more fiscal support, there will likely be a further impact on real estate, particularly on the commercial side. 
  • On Monday, XLRE violated the 200-dma support sharply but did push back into more extreme oversold territory. 
  • With XLRE oversold, I would expect to see a rally this week. Use that rally to lighten up exposure for now. 
  • Short-Term Positioning: Neutral
    • Last week: No change.
    • This week: Sold WELL last week.
  • Long-Term Positioning: Bullish

Utilities

  • XLU has been struggling with resistance at the 200-dma and failed again with Monday’s sell-off.
  • Utilities also broke support at the 50-dma. The performance has been disappointing. 
  • The sector is oversold and is potentially in a better position relative to other sectors of the market, particularly for “defensive” positioning.
  • However, we did reduce our exposure last week by selling our holding in AEP.
  • Short-Term Positioning: Neutral
    • Last week: Hold positions
    • This week: Sold AEP last week. 
  • Long-Term Positioning: Bullish

Health Care

  • XLV broke below its 50-dma and needed to hold support at the previous market highs.
  • With the sector back to oversold short-term, there will likely be an opportunity to add exposure somewhere ahead. 
  • The 200-dma is now essential support for XLV and needs to hold, along with the previous tops going back to 2018. 
  • We are moving our absolute stop to $100
  • Short-Term Positioning: Bullish
    • Last week: Hold positions
    • This week: Hold positions.
  • Long-Term Positioning: Bullish

Discretionary

  • XLY has corrected back to its 50-dma and is holding support for now. 
  • However, it has not become oversold yet, which suggests there is potentially more downside risk. 
  • Without more fiscal support, the money flows into discretionary stocks could well see some weakness.
  • Take profits and hedge risk. 
  • Stop-loss set at $130
  • Short-Term Positioning: Bullish
    • Last week: No position
    • This week: No position
  • Long-Term Positioning: Neutral

Transportation

  • Last week. “The rally in XTN remains exceptionally extended.” 
  • The sector took a beating on Friday as the realization of no more fiscal support puts the “economic reflation” trade, and this sector, in particular, under pressure.
  • The sector is still very overbought. Much of the sector also maintains relatively weak fundamentals. 
  • We took profits in the sector and will wait for a correction to add back to our holdings. 
  • Maintain an absolutely stop-loss at $56
  • Short-Term Positioning: Neutral
    • Last week: No change
    • This week: No change
  • Long-Term Positioning: Bearish

Sector Buy/Sell Review: 09-15-20

HOW TO READ THE SECTOR BUY/SELL REVIEW: 09-15-20

Each week we produce a “Sector Buy/Sell Review” chartbook of the S&P 500 sectors to review where the money is flowing within the market as a whole. Such helps refine not only decision making about what to own and when, but what sectors to overweight or underweight to achieve better performance.

You can also view sector momentum and relative strength daily here.

There are three primary components to each chart below:

  • The price chart is in orange.
  • Over Bought/Over Sold indicator is in gray in the background.
  • The Buy / Sell indicator is in blue.

When the gray indicator is at the TOP of the chart, there is typically more risk and less reward available at the current time. In other words, the best time to BUY is when the short-term condition is over-sold. Likewise, when the buy/sell indicator is above the ZERO line, investments tend to work better than when below the zero lines.

We added 2- and 3-standard deviation extensions from the 50-dma this week. Currently, markets and sectors are back to “stupid” overbought on many levels. We advise caution.

SECTOR BUY/SELL REVIEW: 09-15-20

Basic Materials

  • Looking at XLB, you would not guess we were in an economic recession. Nonetheless, XLB is outperforming the S&P 500 index for the first time in a long while.
  • With XLB pushing into very overbought conditions with a historically high “buy signal,” there seems to be a lot less reward in the sector currently. 
  • It isn’t advisable to chase the sector currently. Look to buy on dips and short-term oversold conditions.
  • Short-Term Positioning: Bullish
    • Last Week: No Positions
    • This Week: No Positions
    • Stop-Loss moved up to $60
  • Long-Term Positioning: Bearish

Communications

  • We noted previously that “XLC has pushed into extremes with the largest deviation from the 200-dma in its history, 3-standard deviations above the 50-dma, and the most overbought buy signal ever. A correction is coming. It is just a question of “when” and “what causes it.”
  • We suggested taking profits and reducing risks, and that correction has now happened. 
  • Currently, XLC is trying to hold the 50-dma but has not become oversold as of yet.
  • Adding a trading position is possible with a very tight stop at $58.
  • Short-Term Positioning: Bullish
    • Last Week: Hold positions
    • This Week: Reduced position by 1%. Will continue doing so until a correction occurs.
  • Long-Term Positioning: Bearish

Energy

  • Energy continues to fail. We were stopped out of our XOM position last week. 
  • Energy is deeply oversold and due for a bounce. However, there is not a lot of support for the sector currently, particularly if we get a dollar rally. 
  • With supports taken out, there is no reason to add exposure here. Wait for a bottom to form and the sector to show some signs of life first.
  • Short-Term Positioning: Bearish
    • Last week: Hold positions
    • This week: Sold XOM in both portfolios.
  • Stop-loss violated.
  • Long-Term Positioning: Neutral

Financials

  • Financials continue to underperform and remain a sector to avoid currently.
  • However, XLF did hold up better than the market during the recent decline. 
  • As noted previously, the 200-dma continues to be a problem for XLF.
  • The bit of pickup on rotation was disappointing, and banks remain out of favor for now.
  • Short-Term Positioning: Neutral
    • Last week: No position
    • This week: No position
  • Long-Term Positioning: Bearish

Industrials

  • Industrials remain extremely extended and overbought.
  • Like materials, industrials are well ahead of the underlying fundamentals. We have grossly reduced our exposure to the sector and are looking for a better opportunity to add back to our position.
  • As suggested previously, take profits and rebalance risk. 
    • Short-Term Positioning: Bullish
    • Last week: No change.
    • This week: No change.
  • Long-Term Positioning: Bearish

Technology

  • Technology stocks, and the Nasdaq, have finally started the long-overdue correction. 
  • While the sector remains overbought and extended well above long-term means, the index is trying to hold the 50-dma and the breakout support of the upper bullish trendline. 
  • We used the pullback to add mildly to our technology positions after taking profits previously. These are “rental trades” we will sell into any short-term rally. 
  • The risk remains to the downside for now.
  • Short-Term Positioning: Bullish
    • Last week: No changes.
    • This week: Added 1% to XLK previously.
  • Stop-loss set at $105
  • Long-Term Positioning: Bullish

Staples

  • As noted previously, “XLP is overbought and is trading at 3-standard deviations above the mean. A correction is coming; timing is the only question.”
  • That correction came but has likely not concluded as of yet. XLP remains elevated above both short and long-term means. 
  • Rebalance holdings and tighten up stop-losses.
  • We are moving our stop-loss alert to $60 as our stop-level.
  • Short-Term Positioning: Bullish
    • Last week: Hold positions
    • This week: Sold PG and added slightly to CLX
  • Long-Term Positioning: Bullish

Real Estate

  • XLRE has triggered a buy signal and is holding support at the 200-dma. 
  • We added some exposure back to REITs previously, and we expect some offsetting pickup if the rest of the market begins to correct. 
  • Move stops up to $35.
  • Short-Term Positioning: Neutral
    • Last week: No change.
    • This week: Looking to add more the XLRE if the sector maintains performance.
  • Long-Term Positioning: Bullish

Utilities

  • XLU has been struggling with resistance at the 200-dma.
  • However, Utilities are holding support at the 50-dma, and we expect we should see a pick up in performance if interest rates pull back. 
  • The sector is oversold and is potentially in a better position relative to other sectors of the market, particularly for “defensive” positioning.
  • Short-Term Positioning: Neutral
    • Last week: Hold positions
    • This week: Hold positions
  • Long-Term Positioning: Bullish

Health Care

  • XLV finally corrected back to the 50-dma and is holding. 
  • With the sector back to oversold short-term, there is a tradeable opportunity. 
  • Trading positions are possible. Put a stop at $104.
  • The 200-dma is now essential support for XLV and needs to hold, along with the previous tops going back to 2018. 
  • We are moving our absolute stop to $100
  • Short-Term Positioning: Bullish
    • Last week: Hold positions
    • This week: Hold positions.
  • Long-Term Positioning: Bullish

Discretionary

  • XLY continues to trade at extremes and is at the most significant deviation from its 200-dma in history. 
  • The same goes for its buy signal. 
  • I have no idea what trips this sector up, but it is coming, and the correction will be substantial. For now, the sector continues to hold up as the chase for AMZN continues.
  • Take profits and hedge risk. 
  • Stop-loss set at $130
  • Short-Term Positioning: Bullish
    • Last week: No position
    • This week: No position
  • Long-Term Positioning: Neutral

Transportation

  • The rally in XTN remains exceptionally extended. 
  • The sector is performing better but is grossly overbought. Much of the sector also maintains relatively weak fundamentals. 
  • We took profits in the sector and will wait for a correction to add back to our holdings. 
  • Maintain an absolutely stop-loss at $56
  • Short-Term Positioning: Neutral
    • Last week: No change
    • This week: No change
  • Long-Term Positioning: Bearish

S&P 500 Technical Analysis Review 09-10-20

S&P 500 Technical Analysis Review 09-10-20

A technical review of the S&P 500 using daily, weekly, and monthly charts to determine overbought, oversold, and risk/reward scenarios for carrying equity exposure.

Over the last couple of weeks, we have discussed the probability of a 5-10% correction in the market. Via “Winter Approaches:” 

“A correction of 5-10% has become increasingly likely over the next few weeks to two months. While a 5-10% correction may not seem like much, it will feel much worse due to the high level of complacency by investors currently.“

So, did the “sell-off” over the last few days resolve the overbought technical conditions? More importantly, was the rally yesterday sustainable? Or is there more correction potentially coming?

For those answers, let’s take a look at the charts. (Be sure and review the Major Market Review each week for updates)

Daily

  • The sell-off of the S&P 500 broke the 20-dma and essentially tested the 50-dma. It also pushed toward the 2-standard deviation band of the 20-dma. This set the market up for a bounce yesterday.
  • However, the bounce did not reverse the current sell signals.
  • The market is reasonably oversold very short-term so a follow-through rally will be critical before taking on additional equity exposure.
  • As shown the market failed at the 20-dma yesterday, which suggests we could see more weakness by the end of the week. A test of the 50-dma is very likely.
  • While we have added some exposure to portfolios recently, we have done so very cautiously with tight stops. We will also add a short-hedge back to our portfolio if the market rallies back to the 20-dma and fails a second time.

Daily Overbought/Sold

  • The chart above shows a variety of measures from the number of stocks above their 50-dma to momentum and deviation from intermediate-term moving averages.
  • The sell-off did reverse some of the very short-term overbought conditions, which gave support to the rally yesterday.
  • However, most other measures still remain overbought short-term suggesting we could see more selling pressure on stocks near-term.
  • Be patient. We are likely going to have a series of corrections back to support that allow for better entry points to add positions.

Weekly

  • On a weekly basis, the market backdrop remains much more bearish.
  • The market is very extended, overbought, and deviated on an intermediate-term basis.
  • The correction barely moved the needle of a market trading 3-standard deviations above the long-term moving average.
  • Read “A Tale Of Two Bull Markets” for more explanation and detail on this and other relevant charts.
  • Remain patient. Odds are high there is more downside risk particularly if the economy begins to show signs of weakening again.

Monthly

  • On a monthly basis, the bearish backdrop is evident.
  • First, from an investment standpoint, look at the previous two bull market advances compared to the current Central Bank fueled explosion. The current extension failed at the top of the rising upper-trend line forming a “megaphone” pattern.
  • In that article, I explain what the technical significance of this pattern is.
  • Secondly, the market is trading MORE THAN 2-standard deviations above the long-term mean which was ideal for a larger corrective decline.
  • The good news, however, is that a monthly BUY signal was triggered with the liquidity fueled advance. Normally these signals are slow to turn, however, in recent years these signals are triggering much more often due to the increased volatility.
  • Importantly, MONTHLY data is ONLY valid at the end of the month. Therefore, these indicators are VERY SLOW to turn. Use the Daily and Weekly charts to manage your risk. The monthly and quarterly chart (below) is to give you some ideas about overall risk management.

Quarterly

  • As noted above, this chart is not about short-term trading but long-term management of risks in portfolios. This is a quarterly chart of the market going back to 1920.
  • Note the market has, only on a few rare occasions, been as overbought as it was earlier this year. The March decline and rebound were so fast that it barely registers on the chart. It also did very little to reduce the long-term risk of a larger decline during the second-half of the current ful-market cycle.
  • Secondly, in the bottom panel, the market has never been this overbought and extended in history, previous corrections last much longer than one month and were very brutal to investors before conditions were reversed.
  • As an investor it is important to keep some perspective about where we are in the current cycle, there is every bit of evidence that a mean-reverting event will eventually happen. Timing is always the issue which is why use daily and weekly measures to manage risk.
  • Don’t get lost in the mainstream media. This is a very important chart.

S&P 500 vs Yield Curve (10yr-2yr)

  • The chart above compares the S&P 500 to the 10-2 year yield spread.
  • The relationship between stocks and bonds is the visualization of the “risk/reward” trade-off.
  • When investors are exceedingly bullish, money flows out of “safe” assets, i.e. bonds, into “risk” assets, i.e. stocks.
  • What the chart shows is that when the yield-spread reverses, which is normally coincident with the onset of a recession, such tends to mark peaks of markets and ensuing corrections in stock prices.
  • While markets have defied the “reversion” of the yield-curve currently, due to massive amounts of stimulus and interventions, you should not become complacent this will continue to be the case.
  • The average recession last 12-18 months and bear markets tend to co-exist during that time frame.
  • The END of bear markets occurs when the yield spread peaks and begins to decline. That is not happening currently.
  • Pay attention, all of the market indicators currently suggest risk outweighs rewards and patience will likely be rewarded with a better opportunity to add exposure.
  • As with the Monthly and Quarterly charts above, this is a “warning” sign to pay attention and manage risk accordingly.

Sector Buy/Sell Review: 09-01-20

seHOW TO READ THE SECTOR BUY/SELL REVIEW: 09-01-20

Each week we produce a “Sector Buy/Sell Review” chartbook of the S&P 500 sectors to review where the money is flowing within the market as a whole. Such helps refine not only decision making about what to own and when, but what sectors to overweight or underweight to achieve better performance.

You can also view sector momentum and relative strength daily here.

There are three primary components to each chart below:

  • The price chart is in orange.
  • Over Bought/Over Sold indicator is in gray in the background.
  • The Buy / Sell indicator is in blue.

When the gray indicator is at the TOP of the chart, there is typically more risk and less reward available at the current time. In other words, the best time to BUY is when the short-term condition is over-sold. Likewise, when the buy/sell indicator is above the ZERO line, investments tend to work better than when below the zero lines.

We added 2- and 3-standard deviation extensions from the 50-dma this week. Currently, markets and sectors are back to “stupid” overbought on many levels. We advise caution.

SECTOR BUY/SELL REVIEW: 09-01-20

Basic Materials

  • The following comment from Sentiment Trader on Monday applies to just about every chart in today’s review: 
    • “Nobody knows if ‘something’ has permanently changed. That’s why we focus a lot on failures. And yes, clearly markets have gone longer and further than they historically have under similar conditions. And yes, it’s possible that the fiscal and monetary stimuli, coupled with the breadth thrusts, recoveries, and trend changes from the spring mean that there will be little or no weakness for months on end. Dunno. It’s just at a point, and admittedly has been for a while, where risk appears very high relative to likely reward over a medium-term time frame.”
  • With XLB pushing into very overbought conditions with a historically high “buy signal,” there seems to be a lot less reward in the sector currently. 
  • Short-Term Positioning: Bullish
    • Last Week: No Positions
    • This Week: No Positions
    • Stop-Loss moved up to $57
  • Long-Term Positioning: Bearish

Communications

  • XLC has pushed into extremes with the largest deviation from the 200-dma in its history, 3-standard deviations above the 50-dma, and the most overbought buy signal ever.
  • A correction is coming. It is just a question of “when” and “what causes it.” 
  • We suggested taking profits and reducing risks previously. Move up, stop levels.
  • We moved our stop to $53.
    • Short-Term Positioning: Bullish
    • Last Week: Hold positions
    • This Week: Reduced position by 1%. Will continue doing so until correction occurs.
  • Long-Term Positioning: Bearish

Energy

  • Energy continues to fail at its 50-dma but is also holding support. 
  • It needs to break above the 50-dma if we are going to see an advance.
  • The sector is not overbought, and there is room for energy to improve on the upside if we see a rotation to value. 
  • Short-Term Positioning: Bearish
    • Last week: Hold positions
    • This week: Hold positions
  • Stop-loss adjusted to $34.00
  • Long-Term Positioning: Neutral

Financials

  • Financials continue to underperform and remain a sector to avoid currently.
  • However, like the rest of the market, they are now getting very extended with a historically high “buy signal.”
  • As noted previously, the 200-dma continues to be a problem for XLF.
  • The bit of pickup on rotation was disappointing, and banks remain out of favor for now.
  • Short-Term Positioning: Neutral
    • Last week: No position
    • This week: No position
  • Long-Term Positioning: Bearish

Industrials

  • Industrials are pushing into the 3-standard deviation zone with the buy signal extremely extended, and the sector remains extremely overbought.
  • As suggested previously, take profits and rebalance risk. 
    • Short-Term Positioning: Bullish
    • Last week: No change.
    • This week: We have reduced our position from 3% to 1%. 
  • Long-Term Positioning: Bearish

Technology

  • Technology stocks, and the Nasdaq, are extremely overbought with the buy signal at a higher level now than in February before the crash. (It’s the highest level EVER.)
  • We have started reducing our positions accordingly given the magnitude of the extension. The deviation above the moving averages will be resolved likely sooner than later. In other words, a correction is coming. 
  • We are starting to hedge our portfolio and reducing risk accordingly. 
  • Short-Term Positioning: Bullish
    • Last week: Reduced positions slightly. 
    • This week: Reduced XLK from 9% to 6.5% of portfolio. 
  • Long-Term Positioning: Bullish

Staples

  • XLP has played catchup with the overall market. The buy signal is now significantly extended at the highest level ever. 
  • XLP is overbought and is trading at 3-standard deviations above the mean. A correction is coming; timing is the only question.
  • Rebalance holdings and tighten up stop-losses.
  • We are moving our stop-loss alert to $60 as our stop-level.
  • Short-Term Positioning: Bullish
    • Last week: Hold positions
    • This week: Rebalancing holdings soon. 
  • Long-Term Positioning: Bullish

Real Estate

  • XLRE has triggered a buy signal and is holding support at the 200-dma. 
  • We added some exposure back to REITs previously, and we expect some offsetting pickup if the rest of the market begins to correct. 
  • Move stops up to $35.
  • Short-Term Positioning: Neutral
    • Last week: Added 3% XLRE in ETF, and 1% WELL, PSA to Equity.
    • This week: No change.
  • Long-Term Positioning: Bullish

Utilities

  • XLU has been holding support at the 200-dma but failed last Friday. 
  • Utilities are holding support at the 50-dma and we expect we should see a pick up in performance if interest rates pull back. 
  • That performance pickup should occur with a risk-off rotation trade in the market.
  • The failure of support keeps us sidelined on additions currently. 
  • Short-Term Positioning: Neutral
    • Last week: Hold positions
    • This week: Hold positions
  • Long-Term Positioning: Bullish

Health Care

  • As noted previously, XLV is getting extremely extended above the 200-dma. 
  • With the buy signal now extremely extended a correction is likely. It is time to start thinking about taking some profits and reducing risk. 
  • The 200-dma is now essential support and needs to hold, along with the previous tops going back to 2018. 
  • We are moving our stop to $100
  • Short-Term Positioning: Bullish
    • Last week: Hold positions
    • This week: Hold positions.
  • Long-Term Positioning: Bullish

Discretionary

  • XLY is trading at extremes and is at the most significant deviation from its 200-dma in history. 
  • The same goes for its buy signal. 
  • I have no idea what trips this sector up, but it is coming, and the correction will be substantial. 
  • Take profits and hedge risk. 
  • Stop-loss set at $130
  • Short-Term Positioning: Bullish
    • Last week: No position
    • This week: No position
  • Long-Term Positioning: Neutral

Transportation

  • The rally in XTN is now 3-standard deviations above the moving average after finally clearly the 200-dma resistance.
  • The sector is performing better, but weak relative to the index. 
  • Take profits and reduce risk.
  • Stop-loss set at $56
  • Short-Term Positioning: Neutral
    • Last week: Reduced position in IYT.
    • This week: Rebalance and reduce risk. 
  • Long-Term Positioning: Bearish

Sector Buy/Sell Review: 08-25-20

HOW TO READ THE SECTOR BUY/SELL REVIEW: 08-25-20

Each week we produce a “Sector Buy/Sell Review” chartbook of the S&P 500 sectors to review where the money is flowing within the market as a whole. This helps refine not only decision making about what to own and when, but what sectors to overweight or underweight to achieve better performance.

You can also view sector momentum and relative strength daily here.

There are three primary components to each chart below:

  • The price chart is in orange
  • Over Bought/Over Sold indicator is in gray in the background.
  • The Buy / Sell indicator is in blue.

When the gray indicator is at the TOP of the chart, there is typically more risk and less reward available at the current time. In other words, the best time to BUY is when the short-term condition is over-sold. Likewise when the buy/sell indicator is above the ZERO line investments have a tendency of working better than when below the zero lines.

We added 2- and 3-standard deviation extensions from the 50-dma this week. We are back to “stupid” overbought on many levels. Caution is advised.

SECTOR BUY/SELL REVIEW: 08-25-20

Basic Materials

  • The following comment applies to just about every chart in today’s review: “This is getting a bit ridiculous in terms of price deviations from long-term means.”
  • With the market pushing into, and confirming all-time highs, basic materials rallied on Monday pushing into the previous high territory. 
  • The buy signal is now at the highest level on record.
  • It WILL revert at some point, most likely after the bulls achieve an all-time high print for the major index.
  • Short-Term Positioning: Bullish
    • Last Week: No Positions
    • This Week: No Positions
  • Stop-Loss moved up to $57
  • Long-Term Positioning: Bearish

Communications

  • XLC has pushed into extremes with the largest deviation from the 200-dma in its history, 3-standard deviations above the 50-dma, and the most overbought buy signal ever.
  • A correction is coming. It is just a question of “when” and “what causes it.” 
  • Take profits and reduce risk. Move up stop levels.
  • We moved our stop to $53.
    • Short-Term Positioning: Bullish
    • Last Week: Hold positions
    • This Week: We are starting to rebalance our holdings.
  • Long-Term Positioning: Neutral

Energy

  • Energy continues to fail at its 50-dma, but is also holding support. 
  • It needs to break above the 50-dma if we are going to see an advance.
  • The sector is not overbought, and there is room for energy to improve on the upside if we see a rotation to value occur. 
  • Short-Term Positioning: Bullish
    • Last week: Hold positions
    • This week: Hold positions
  • Stop-loss adjusted to $34.00
  • Long-Term Positioning: Bearish

Financials

  • Financials continue to underperform and remain a sector to avoid currently.
  • As noted previously, the 200-dma was the next target and financials failed at that resistance last week.
  • The bit of pickup on rotation was disappointing, and banks remain out of favor for now.
  • Short-Term Positioning: Neutral
    • Last week: No position
    • This week: No position
  • Long-Term Positioning: Bearish

Industrials

  • Industrials bounced of support at the 200-dma and went parabolic into the 3-standard deviation zone. 
  • That buy signal is very extended and the sector is extremely overbought.
  • A dollar counter-trend rally could impact the sector due to international exposure. 
  • Take profits and rebalance risk. 
    • Short-Term Positioning: Bullish
    • Last week: No change.
    • This week: No change.
  • Long-Term Positioning: Bearish

Technology

  • Technology stocks, and the Nasdaq, are extremely overbought with the buy signal at a higher level now than in February before the crash. (It’s the highest level EVER.)
  • We are holding our positions currently, after taking some profits. But the deviation above the moving averages will be resolved likely sooner than later. In other words, a correction is coming. 
  • We are starting to hedge our portfolio and reducing risk accordingly. 
  • Short-Term Positioning: Bullish
    • Last week: Reduced positions slightly. 
    • This week: Reduce risk if you haven’t.
    • Long-Term Positioning: Bullish

Staples

  • XLP has now played catchup with the overall market. The buy signal is now extremely extended at the highest level ever. 
  • XLP is overbought and is trading at 3-standard deviations above the mean. A correction is coming, timing is the only question.
  • Rebalance holdings and tighten up stop-losses.
  • We are moving our stop-loss alert to $59 as our stop-level.
  • Short-Term Positioning: Bullish
    • Last week: Hold positions
    • This week: Rebalancing holdings soon. 
    • Long-Term Positioning: Bullish

Real Estate

  • XLRE has triggered a buy signal and is holding support at the 200-dma. 
  • We added some exposure back to REITs last week. (See portfolio commentary.)
  • Move stops up to $34.
  • Short-Term Positioning: Neutral
    • Last week: No holdings.
    • This week: Added 3% XLRE in ETF, and 1% WELL, PSA to Equity.
    • Long-Term Positioning: Bullish

Utilities

  • XLU has been holding support at the 200-dma but failed last Friday. It is now critical that XLU climbs back above resistance by the end of the week. 
  • We are looking to add some exposure here cautiously for a risk-off rotation trade in the market.
  • The failure of support keeps us sidelined on additions currently. 
  • Short-Term Positioning: Neutral
    • Last week: Hold positions
    • This week: Hold positions
  • Long-Term Positioning: Bullish

Health Care

  • As noted previously, XLV is trading 3-standard deviations above the moving average and a correction was likely. 
  • We are getting some consolidation and sideways trading. We will see if it will be enough to roll back some of the overbought conditions.
  • The 200-dma is now important support and needs to hold, along with the previous tops going back to 2018. 
  • We are moving our stop to $100
  • Short-Term Positioning: Bullish
    • Last week: Hold positions
    • This week: Hold positions.
  • Long-Term Positioning: Bullish

Discretionary

  • XLY is trading at extremes and is at the biggest deviation from its 200-dma in history. 
  • The same goes for its buy signal. 
  • I have no idea what trips this sector up, but it is coming and the correction will be substantial. 
  • Take profits and hedge risk. 
  • Stop-loss is set at $130
    • Short-Term Positioning: Bullish
    • Last week: No position
    • This week: No position
  • Long-Term Positioning: Neutral

Transportation

  • The rally in XTN is now 3-standard deviations above the moving average after finally clearly the 200-dma resistance.
  • The sector is performing better, but weak relative to the index. 
  • Take profits and reduce risk.
  • Stop-loss set at $54
  • Short-Term Positioning: Neutral
    • Last week: Reduced position in IYT.
    • This week: Rebalance and reduce risk. 
  • Long-Term Positioning: Bearish

Sector Buy/Sell Review: 08-18-20

HOW TO READ THE SECTOR BUY/SELL REVIEW: 08-18-20

Each week we produce a “Sector Buy/Sell Review” chart book of the S&P 500 sectors to review where money is flowing within the market as whole. This helps refine not only decision making about what to own and when, but what sectors to overweight or underweight to achieve better performance.

You can also view sector momentum and relative strength daily here.

There are three primary components to each chart below:

  • The price chart is in orange
  • Over Bought/Over Sold indicator is in gray in the background.
  • The Buy / Sell indicator is in blue.

When the gray indicator is at the TOP of the chart, there is typically more risk and less reward available at the current time. In other words, the best time to BUY is when the short-term condition is over-sold. Likewise when the buy/sell indicator is above the ZERO line investments have a tendency of working better than when below the zero line.

We added 2- and 3-standard deviation extensions from the 50-dma this week. We are back to “stupid” overbought on many levels. Caution is advised.

SECTOR BUY/SELL REVIEW: 08-18-20

Basic Materials

  • With the market trying desperately to make all-time highs, basic materials rallied on Monday pushing into new high territory. 
  • The buy signal is now at the highest level on record.
  • It WILL revert at some point, most likely after the bulls achieve an all-time high print for the major index.
  • Short-Term Positioning: Bullish
    • Last Week: No Positions
    • This Week: No Positions
  • Stop-Loss moved up to $57
  • Long-Term Positioning: Bearish

Communications

  • XLC has pushed up on extremes with a largest deviation from the 200-dma in its history.
  • It is also pushing the most extreme overbought condition in its history. 
  • A correction is coming. It is just a function of time.
  • Take profits and reduce risk. Move up stop levels.
  • We moved our stop to $53.
    • Short-Term Positioning: Bullish
    • Last Week: Hold positions
    • This Week: We are starting to rebalance our holdings.
  • Long-Term Positioning: Neutral

Energy

  • Energy continues to push up on its 50-dma from an oversold condition and has done so again.
  • It needs to break above the 50-dma if we are going to see an advance.
  • The sector is not overbought, and there is room for energy to improve on the upside if we see a rotation to value occur. 
  • Short-Term Positioning: Bullish
    • Last week: Hold positions
    • This week: Hold positions
  • Stop loss adjusted to $34.00
  • Long-Term Positioning: Bearish

Financials

  • Financials continue to underperform and remain a sector to avoid currently.
  • As noted previously, the 200-dma was the next target and financials failed at that resistance on Monday. 
  • The bit of pickup on rotation was disappointing, and banks remain out of favor for now.
  • Short-Term Positioning: Neutral
    • Last week: No position
    • This week: No position
  • Long-Term Positioning: Bearish

Industrials

  • Industrials bounced of support at the 200-dma and went parabolic into the 3-standard deviation zone. 
  • That buy signal is very extended and the sector is extremely overbought.
  • A dollar counter-trend rally could impact the sector due to international exposure. 
  • Take profits and rebalance risk. 
    • Short-Term Reduced XLI to 2%
    • Last week: No change.
    • This week: Hold positions. Reduce risk. 
  • Long-Term Positioning: Bearish

Technology

  • Technology stocks, and the Nasdaq, are extremely overbought with the buy signal at a higher level now than in February before the crash. (It’s the highest level EVER.)
  • We are holding our positions currently, after taking some profits. But the deviation above the moving averages will be resolved likely sooner than later. In other words, a correction is coming. 
  • We are starting to hedge our portfolio and reducing risk accordingly. 
  • Short-Term Positioning: Bullish
    • Last week: Reduced positions slightly. 
    • This week: Reduce risk if you haven’t.
    • Long-Term Positioning: Bullish

Staples

  • XLP has now played catchup with the overall market. The buy signal is now extremely extended at the highest level ever. 
  • XLP is overbought and is trading at 3-standard deviations above the mean. A correction is coming, timing is the only question.
  • Rebalance holdings and tighten up stop-losses.
  • We are moving our stop-loss alert to $59 as our stop-level.
  • Short-Term Positioning: Bullish
    • Last week: Hold positions
    • This week: Rebalancing holdings soon. 
    • Long-Term Positioning: Bullish

Real Estate

  • XLRE has triggered a buy signal and is holding support at the 200-dma. 
  • We are getting more interested in REITs for a potential rotation trade. 
  • It is too early to add exposure just yet, but it could be soon.
  • Move stops up to $34.
  • Short-Term Positioning: Neutral
    • Last week: No holdings.
    • This week: No holdings
    • Long-Term Positioning: Bullish

Utilities

  • Like XLRE, XLU has been holding support at the 200-dma.
  • We are looking to add some exposure here cautiously for a risk-off rotation trade in the market .
  • So far, support seems to be holding.
  • Short-Term Positioning: Neutral
    • Last week: Hold positions
    • This week: Hold positions
  • Long-Term Positioning: Bullish

Health Care

  • As noted previously, XLV is trading 3-standard deviations above the moving average, a correction is likely in the short-term. 
  • The 200-dma is now important support and needs to hold, along with the previous tops going back to 2018. 
  • We are moving our stop to $100
  • Short-Term Positioning: Bullish
    • Last week: Hold positions
    • This week: Hold positions.
  • Long-Term Positioning: Bullish

Discretionary

  • XLY is trading at extremes and is at the biggest deviation from its 200-dma in history. 
  • The same goes with its buy signal. 
  • I have no idea what trips this sector up, but it is coming and the correction will be substantial. 
  • Take profits and hedge risk. 
  • Hold current positions but maintain your stop levels. We recommend taking profits.
  • Stop loss is set at $130
    • Short-Term Positioning: Bullish
    • Last week: No position
    • This week: No position
  • Long-Term Positioning: Neutral

Transportation

  • The rally in XTN is now 3-standard deviations above the moving average after finally clearly the 200-dma resistance.
  • The sector is performing better, but weak relative to the index. 
  • Take profits and reduce risk.
  • Stop loss set at $54
  • Short-Term Positioning: Neutral
    • Last week: Reduced position in IYT.
    • This week: Rebalance and reduce risk. 
  • Long-Term Positioning: Bearish

Sector Buy/Sell Review: 08-11-20

HOW TO READ THE SECTOR BUY/SELL REVIEW: 08-11-20

Each week we produce a “Sector Buy/Sell Review” chart book of the S&P 500 sectors to review where money is flowing within the market as whole. This helps refine not only decision making about what to own and when, but what sectors to overweight or underweight to achieve better performance.

You can also view sector momentum and relative strength daily here.

There are three primary components to each chart below:

  • The price chart is in orange
  • Over Bought/Over Sold indicator is in gray in the background.
  • The Buy / Sell indicator is in blue.

When the gray indicator is at the TOP of the chart, there is typically more risk and less reward available at the current time. In other words, the best time to BUY is when the short-term condition is over-sold. Likewise when the buy/sell indicator is above the ZERO line investments have a tendency of working better than when below the zero line.

We added 2- and 3-standard deviation extensions from the 50-dma this week. We are back to “stupid” overbought on many levels. Caution is advised.

SECTOR BUY/SELL REVIEW: 08-11-20

Basic Materials

  • With the market trying desperately to make all-time highs, basic materials rallied on Monday back towards previous highs.
  • The buy signal is now at the highest level on record. It WILL revert at some point soon, most likely after the bulls achieve an all-time high print for the index.
  • Short-Term Positioning: Bullish
    • Last Week: No Positions
    • This Week: No Positions
  • Stop-Loss moved up to $57
  • Long-Term Positioning: Bearish

Communications

  • XLC has pushed up on extremes with a large deviation from the 200-dma, and is pushing the most extreme overbought condition in its history. 
  • A correction is coming. It is just a function of time.
  • Take profits and reduce risk. Move up stop levels.
  • We moved our stop to $53.
    • Short-Term Positioning: Bullish
    • Last Week: Hold positions
    • This Week: Hold positions
  • Long-Term Positioning: Neutral

Energy

  • Energy continues to push up on its 50-dma from an oversold condition and has done so again.
  • It needs to break above the 50-dma if we are going to see an advance.
  • The sector is not overbought, and there is room for energy to improve on the upside if we see a rotation to value occur. 
  • Short-Term Positioning: Bullish
    • Last week: Hold positions
    • This week: Hold positions
  • Stop loss adjusted to $34.00
  • Long-Term Positioning: Bearish

Financials

  • Financials continue to underperform and remain a sector to avoid currently.
  • As noted previously, the initial support was at $24, which was violated. That level is being tested as “resistance” last week, and broke through on Monday. This puts the 200-dma as the next target.
  • There may be a bit of pickup on a rotation plan, but banks remain out of favor for now.
  • Short-Term Positioning: Neutral
    • Last week: No position
    • This week: No position
  • Long-Term Positioning: Bearish

Industrials

  • Industrials bounced of support at the 50% retracement level and triggered a buy signal. 
  • That buy signal is very extended and industrials have surged into 3-standard deviation territory.
  • We are watching the dollar as a counter-trend rally could impact the sector due to international exposure. 
  • Take profits and rebalance risk. 
    • Short-Term Positioning: Neutral
    • Last week: Reduced XLI to 2% 
    • This week: Hold positions. Reduce risk. 
  • Long-Term Positioning: Bearish

Technology

  • Technology stocks, and the Nasdaq, are extremely overbought with the buy signal at a higher level now than in February before the crash. (It’s the highest level EVER.)
  • We are holding our positions currently, after taking some profits. But the deviation above the moving averages will be resolved likely sooner than later. In other words, a correction is coming. 
  • Short-Term Positioning: Bullish
    • Last week: Reduced positions slightly. 
    • This week: Hold positions. Reduce risk if you haven’t.
    • Long-Term Positioning: Bullish

Staples

  • XLP triggered a buy signal after adding slightly to our positions previously. The buy signal is now extremely extended. 
  • XLP is overbought and is trading at 3-standard deviations above the mean. A correction is coming, timing is the only question.
  • Rebalance holdings and tighten up stop-losses.
  • We are moving our stop-loss alert to $59 as our stop-level.
  • Short-Term Positioning: Bullish
    • Last week: Hold positions
    • This week: Hold positions
    • Long-Term Positioning: Bullish

Real Estate

  • Like XLP, XLRE has triggered a buy signal.
  • XLRE broke above its consolidation wedge and the 200-dma. I would like to see XLRE hold the 200-dma before adding exposure to the sector. 
  • Move stops up to $34.
  • Short-Term Positioning: Neutral
    • Last week: No holdings.
    • This week: No holdings
    • Long-Term Positioning: Bullish

Utilities

  • XLU has been lagging but has triggered a very early BUY signal. With XLRE also on a buy, it suggests we may see a rotation from risk starting. It’s early, so we will see.
  • So far, support seems to be holding.
  • Short-Term Positioning: Neutral
    • Last week: Hold positions
    • This week: Hold positions
  • Long-Term Positioning: Bullish

Health Care

  • As noted previously, XLV is trading 3-standard deviations above the moving average, a correction is likely short-term. 
  • With the buy signal now getting more extremely overbought, corrections should be contained back to support where holdings can be added. 
  • The 200-dma is now important support and needs to hold, along with the previous tops going back to 2018. 
  • We are moving our stop to $96
  • Short-Term Positioning: Bullish
    • Last week: Hold positions
    • This week: Hold positions.
  • Long-Term Positioning: Bullish

Discretionary

  • AMZN is still driving this sector and XLY is trading at extremes.
  • With the buy signal at the highest level on record a correction is coming. It is just a function of time and a catalyst. (Common theme in this missive.)
  • Hold current positions but maintain your stop levels. We recommend taking profits.
  • Stop loss is set at $122.50
  • Short-Term Positioning: Bullish
    • Last week: No position
    • This week: No position
  • Long-Term Positioning: Neutral

Transportation

  • The rally in XTN is now 3-standard deviations above the moving average after finally clearly the 200-dma resistance.
  • The sector is still performing weakly, but had a chase on Monday. 
  • Risk is elevated in the sector. Take profits and reduce risk.
  • Stop loss set at $50
  • Short-Term Positioning: Neutral
    • Last week: Reduced position in IYT.
    • This week: Rebalance and reduce risk. 
  • Long-Term Positioning: Bearish

Sector Buy/Sell Review: 08-04-20

HOW TO READ THE SECTOR BUY/SELL REVIEW: 08-04-20

Each week we produce a “Sector Buy/Sell Review” chart book of the S&P 500 sectors to review where money is flowing within the market as whole. This helps refine not only decision making about what to own and when, but what sectors to overweight or underweight to achieve better performance.

You can also view sector momentum and relative strength daily here.

There are three primary components to each chart below:

  • The price chart is in orange
  • Over Bought/Over Sold indicator is in gray in the background.
  • The Buy / Sell indicator is in blue.

When the gray indicator is at the TOP of the chart, there is typically more risk and less reward available at the current time. In other words, the best time to BUY is when the short-term condition is over-sold. Likewise when the buy/sell indicator is above the ZERO line investments have a tendency of working better than when below the zero line.

We added 2- and 3-standard deviation extensions from the 50-dma this week. We are back to “stupid” overbought on many levels. Caution is advised.

SECTOR BUY/SELL REVIEW: 08-04-20

Basic Materials

  • As we noted previously, XLB was too overbought and a correction was likely. That correction started over the last couple of days.
  • The buy signal is now at the highest level on record. It WILL revert at some point soon.
  • Short-Term Positioning: Bullish
    • Last Week: No Positions
    • This Week: No Positions
  • Stop-Loss moved up to $57
  • Long-Term Positioning: Bearish

Communications

  • XLC has pushed up on extremes with a large deviation from the 200-dma, and is pushing the most extreme overbought condition in its history. 
  • A correction is coming. It is just a function of time.
  • Take profits and reduce risk. Move up stop levels.
  • We moved our stop to $53.
    • Short-Term Positioning: Bullish
    • Last Week: Hold positions
    • This Week: Hold positions
  • Long-Term Positioning: Neutral

Energy

  • Energy continues to push up on its 50-dma from an oversold condition.
  • Energy is not overbought, and there is room for energy to improve on the upside if we see a rotation to value occur. 
  • However, that has not occurred and energy failed at the 50-dma. It needs to hold support at the recent lows of $35.
  • Short-Term Positioning: Bullish
    • Last week: Hold positions
    • This week: Hold positions
  • Stop loss adjusted to $34.00
  • Long-Term Positioning: Bearish

Financials

  • Financials continue to underperform and remain a sector to avoid currently.
  • As noted previously, the initial support was at $24, which was violated. Now that level is being tested as “resistance.” 
  • There may be a bit of pickup on a rotation plan, but banks remain out of favor for now.
  • Short-Term Positioning: Neutral
    • Last week: No position
    • This week: No position
  • Long-Term Positioning: Bearish

Industrials

  • Industrials bounced of support at the 50% retracement level and triggered a buy signal.
  • That buy signal is very extended and the 200-dma is acting as tough resistance. 
  • We are watching the dollar as a counter-trend rally could impact the sector due to international exposure.
  • We took profits in our position last week. 
    • Short-Term Positioning: Neutral
    • Last week: No position.
    • This week: Reduced XLI to 2% 
  • Long-Term Positioning: Bearish

Technology

  • Technology continues to push higher as the “momentum chase” continues. On Monday there was a sharp advance in the sector following our increase of XLK last Thursday and strong earnings from tech giants later that night. 
  • Technology stocks, and the Nasdaq, are extremely overbought with the buy signal at a higher level now than in February before the crash. (It’s the highest level EVER.)
  • We are holding our positions currently, but took profits in AAPL on Monday after adding to it  last Thursday. 
  • The deviation above the moving averages will be resolved likely sooner than later. In other words, a correction is coming. 
  • Short-Term Positioning: Bullish
    • Last week: Reduced positions slightly. 
    • This week: Took profits in AAPL.
    • Long-Term Positioning: Bullish

Staples

  • XLP triggered a buy signal after adding slightly to our positions previously. The buy signal is now extremely extended. 
  • XLP is overbought and is trading at 3-standard deviations above the mean. A correction is coming, timing is the only question.
  • Rebalance holdings and tighten up stop-losses.
  • We are moving our stop-loss alert to $59 as our stop-level.
  • Short-Term Positioning: Bullish
    • Last week: Hold positions
    • This week: Hold positions
    • Long-Term Positioning: Bullish

Real Estate

  • Like XLP, XLRE has triggered a buy signal.
  • XLRE broke above its consolidation wedge and the 200-dma. I would like to see XLRE hold the 200-dma before adding exposure to the sector. 
  • Move stops up to $34.
  • Short-Term Positioning: Neutral
    • Last week: No holdings.
    • This week: No holdings
    • Long-Term Positioning: Bullish

Utilities

  • XLU has been lagging but has triggered a very early BUY signal. With XLRE also on a buy, it suggests we may see a rotation from risk starting. It’s early, so we will see.
  • On Monday, Utilities badly underperformed so we need to see some improvement.
  • Short-Term Positioning: Neutral
    • Last week: Hold positions
    • This week: Hold positions
  • Long-Term Positioning: Bullish

Health Care

  • As noted previously, XLV is trading 3-standard deviations above the moving average, a correction is likely short-term. 
  • With the buy signal now getting more extremely overbought, corrections should be contained back to support where holdings can be added. 
  • The 200-dma is now important support and needs to hold, along with the previous tops going back to 2018. 
  • We are moving our stop to $96
  • Short-Term Positioning: Bullish
    • Last week: Hold positions
    • This week: Hold positions.
  • Long-Term Positioning: Bullish

Discretionary

  • AMZN is still driving this sector and XLY is trading at extremes.
  • With the buy signal at the highest level on record a correction is coming. It is just a function of time and a catalyst. (Common theme in this missive.)
  • Hold current positions but maintain your stop levels. We recommend taking profits.
  • Stop loss is set at $122.50
  • Short-Term Positioning: Bullish
    • Last week: No position
    • This week: No position
  • Long-Term Positioning: Neutral

Transportation

  • The rally in XTN is losing traction and failed at resistance again at the 200-dma.
  • The sector is performing weakly so caution is advised. 
  • If the economy begins to show signs of deterioration, we will likely see the recent rally in transportation fail. Risk is elevated.
  • Stop loss set at $50
  • Short-Term Positioning: Neutral
    • Last week: Hold positions
    • This week: Reduced position in IYT.
  • Long-Term Positioning: Bearish

Sector Buy/Sell Review: 07-28-20

HOW TO READ THE SECTOR BUY/SELL REVIEW: 07-28-20

Each week we produce a “Sector Buy/Sell Review” chart book of the S&P 500 sectors to review where money is flowing within the market as whole. This helps refine not only decision making about what to own and when, but what sectors to overweight or underweight to achieve better performance.

You can also view sector momentum and relative strength daily here.

There are three primary components to each chart below:

  • The price chart is in orange
  • Over Bought/Over Sold indicator is in gray in the background.
  • The Buy / Sell indicator is in blue.

When the gray indicator is at the TOP of the chart, there is typically more risk and less reward available at the current time. In other words, the best time to BUY is when the short-term condition is over-sold. Likewise when the buy/sell indicator is above the ZERO line investments have a tendency of working better than when below the zero line.

We added 2- and 3-standard deviation extensions from the 50-dma this week. We are back to “stupid” overbought on many levels. Caution is advised.

SECTOR BUY/SELL REVIEW: 07-28-20

Basic Materials

  • As noted last week, XLB is too overbought currently to chase the sector further, but hold trading positions for now. However, stops should be moved up to $57.
  • Our target for the trade was $60-61 which has now been reached. Take profits.
  • The buy signal is now at the highest level on record. It WILL revert at some point soon.
  • Short-Term Positioning: Bullish
    • Last Week: No Positions
    • This Week: No Positions
  • Stop-Loss moved up to $57
  • Long-Term Positioning: Bearish

Communications

  • XLC has pushed up on extremes with a large deviation from the 200-dma, and is pushing the most extreme overbought condition in its history. 
  • A correction is coming. It is just a function of time. 
  • Take profits and reduce risk. Move up stop levels.
  • We moved our stop to $53.
    • Short-Term Positioning: Bullish
    • Last Week: Hold positions
    • This Week: Hold positions
  • Long-Term Positioning: Neutral

Energy

  • Energy continues to push up on its 50-dma from an oversold condition.
  • Energy is not overbought, and there is room for energy to improve on the upside if we see a rotation to value occur. 
  • Current support levels must hold.
  • Short-Term Positioning: Bullish
    • Last week: Hold positions
    • This week: Hold positions
  • Stop loss adjusted to $34.00
  • Long-Term Positioning: Bearish

Financials

  • Financials continue to underperform and remain a sector to avoid currently.
  • As previously, the initial support was at $24, which was violated. Now that level is being tested as “resistance.” On Monday, that resistance held while the market rallied.
  • There may be a bit of pickup on a rotation plan, but banks remain out of favor for now.
  • Short-Term Positioning: Neutral
    • Last week: No position
    • This week: No position
  • Long-Term Positioning: Bearish

Industrials

  • Industrials bounced of support at the 50% retracement level and triggered a buy signal.
  • That buy signal is very extended and the 200-dma is acting as tough resistance. 
  • We are watching the dollar as a counter-trend rally could impact the sector due to international exposure.
  • We added a small position previously, but are keeping our stop level fairly tight.
    • Short-Term Positioning: Neutral
    • Last week: No position.
    • This week: 2% position in XLI.
  • Long-Term Positioning: Bearish

Technology

  • Technology continues to push higher as the “virus trade” is back on. However, on Monday there was a sharp advance in the sector. 
  • Technology stocks, and the Nasdaq, are extremely overbought with the buy signal at a higher level now than in February before the crash. 
  • We are holding our positions currently, but as noted previously, we took profits and reduced our weightings slightly. 
  • The deviation above the moving averages will be resolved likely sooner than later. In other words, a correction is coming. 
  • Short-Term Positioning: Bullish
    • Last week: Reduced positions slightly. 
    • This week: Hold positions.
    • Long-Term Positioning: Bullish

Staples

  • XLP triggered a buy signal after adding slightly to our positions previously. 
  • XLP is overbought and is trading at 3-standard deviations above the mean. A correction is coming but should be shallow given the very early buy signal.
  • Use corrections to add to positions.
  • We are moving our stop-loss alert to $57 as our stop-level.
  • Short-Term Positioning: Bullish
    • Last week: Hold positions
    • This week: Hold positions
    • Long-Term Positioning: Bullish

Real Estate

  • Like XLP, XLRE has triggered a buy signal. However, XLRE is in a very tight consolidation wedge.
  • A break to upside should see XLRE back to recent highs. A break to the downside, will see a drop back to June lows. 
  • XLRE tested and failed the 200-dma again, turning us bearish on the sector for now. We sold all our holdings for the time being until we get better clarity on the fundamental underpinnings.
  • Short-Term Positioning: Neutral
    • Last week: Sold 100% of positions
    • This week: No holdings
    • Long-Term Positioning: Bullish

Utilities

  • XLU has been lagging but is working off its previous sell signal.
  • Relative performance has been improving and is testing the 200-dma. On Monday, however, Utilities badly underperformed and failed at the 200-dma. Our alert level has risen.
  • XLU is getting close to triggering a buy signal which should correspond with improving performance. A risk-off trade should see a rotation to the sector. 
  • Short-Term Positioning: Neutral
    • Last week: Hold positions
    • This week: Hold positions
  • Long-Term Positioning: Bullish

Health Care

  • As previously, XLV was consolidating and we expected a breakout to the upside. That occurred and now, with a surge to 3-standard deviations above the moving average, a correction is likely short-term. 
  • With the buy signal now extremely overbought, corrections should be contained back to support where holdings can be added. 
  • The 200-dma is now important support and needs to hold, along with the previous tops going back to 2018. 
  • We are moving our stop to $96
  • Short-Term Positioning: Bullish
    • Last week: Hold positions
    • This week: Hold positions.
  • Long-Term Positioning: Bullish

Discretionary

  • AMZN is still driving this sector and the nearly 8% move higher on Monday pushed XLY to extremes.
  • With the buy signal at the highest level on record a correction is coming. It is just a function of time and a catalyst.
  • Hold current positions but maintain your stop levels. We recommend taking profits.
  • Stop loss is set at $122.50
  • Short-Term Positioning: Bullish
    • Last week: No position
    • This week: No position
  • Long-Term Positioning: Neutral

Transportation

  • The rally in XTN is losing traction and failed at resistance again at the 200-dma.
  • The sector is performing weakly so caution is advised. 
  • If the economy begins to show signs of deterioration, we will likely see the recent rally in transportation fail. Risk is elevated.
  • Stop loss set at $50
  • Short-Term Positioning: Neutral
    • Last week: Hold positions
    • This week: Hold positions
  • Long-Term Positioning: Bearish

Sector Buy/Sell Review: 07-21-20

Each week we produce a “Sector Buy/Sell Review” chart book of the S&P 500 sectors to review where money is flowing within the market as whole. This helps refine not only decision making about what to own and when, but what sectors to overweight or underweight to achieve better performance.

HOW TO READ THE SECTOR BUY/SELL REVIEW CHARTS

There are three primary components to each chart:

  • The price chart is in orange
  • Over Bought/Over Sold indicator is in gray in the background.
  • The Buy / Sell indicator is in blue.

When the gray indicator is at the TOP of the chart, there is typically more risk and less reward available at the current time. In other words, the best time to BUY is when the short-term condition is over-sold. Likewise when the buy/sell indicator is above the ZERO line investments have a tendency of working better than when below the zero line.

We added 2- and 3-standard deviation extensions from the 50-dma this week. We are back to “stupid” overbought on many levels. Caution is advised.

Basic Materials

  • As noted last week, XLB is too overbought currently to chase the sector further, but hold trading positions for now. However, stops should be moved up to $57.
  • Our target for the trade was $60-61 which has now been reached. Take profits.
  • The buy signal is now at the highest level on record. It WILL revert at some point soon.
  • Short-Term Positioning: Bullish
    • Last Week: No Positions
    • This Week: No Positions
  • Stop-Loss moved up to $57
  • Long-Term Positioning: Bearish

Communications

  • XLC broke out to new highs and is pushing the most extreme overbought condition in its history. 
  • A correction is coming. It is just a function of time. 
  • Take profits and reduce risk. Move up stop levels.
  • We moved our stop to $53.
    • Short-Term Positioning: Bullish
    • Last Week: Hold positions
    • This Week: Hold positions
  • Long-Term Positioning: Neutral

Energy

  • After a very small bounce in Energy, that bounce has faded as money is chasing momentum. 
  • If the current levels can hold, we should see a rotation to this sector soon particularly if the dollar weakens further.
  • Short-Term Positioning: Bullish
    • Last week: Hold positions
    • This week: Hold positions
  • Stop loss adjusted to $34.00
  • Long-Term Positioning: Bearish

Financials

  • Financials are back to underperforming and remain a sector to avoid currently.
  • As noted last week, the initial support was at $24, which was violated. Now that level will be tested as “resistance” which happened yesterday.
  • There may be a bit of pickup on a rotation plan, but banks remain out of favor for now.
  • Short-Term Positioning: Neutral
    • Last week: No position
    • This week: No position
  • Long-Term Positioning: Bearish

Industrials

  • Industrials bounced of support at the 50% retracement level and triggered a buy signal.
  • However, since then, the sector performance has not improved much. But a break above the 200-dma will improve prospects.
  • We added a small position last week, but are keeping our stop level fairly tight.
    • Short-Term Positioning: Neutral
    • Last week: No position.
    • This week: 2% position in XLI.
  • Long-Term Positioning: Bearish

Technology

  • Technology continues push higher as the “virus trade” is back on. However, on Monday there was a sharp advance in the sector. 
  • Technology stocks, and the Nasdaq, are extremely overbought with the buy signal at a higher level now than in February before the crash. 
  • We are holding our positions currently, but as noted last week, we took profits and reduced our weightings slightly. 
  • The deviation above the moving averages will be resolved likely sooner than later. In other words, a correction is coming. 
  • Short-Term Positioning: Bullish
    • Last week: Reduced positions slightly. 
    • This week: Hold positions.
    • Long-Term Positioning: Bullish

Staples

  • XLP triggered a buy signal after adding slightly to our positions previously. 
  • XLP is overbought and is trading at 3-standard deviations above the mean. A correction is coming but should be shallow given the very early buy signal.
  • Use corrections to add to positions.
  • We are moving our stop-loss alert to $57 as our stop-level.
  • Short-Term Positioning: Bullish
    • Last week: Hold positions
    • This week: Hold positions
    • Long-Term Positioning: Bullish

Real Estate

  • Like XLP, XLRE has triggered a buy signal. However, XLRE is in a very tight consolidation wedge.
  • A break to upside should see XLRE back to recent highs. A break to the downside, will see a drop back to June lows. 
  • XLRE tested and failed the 200-dma again, turning us bearish on the sector for now. We sold all our holdings for the time being until we get better clarity on the fundamental underpinnings.
  • Short-Term Positioning: Neutral
    • Last week: Sold 100% of positions
    • This week: No holdings
    • Long-Term Positioning: Bullish

Utilities

  • XLU has been lagging but is working off its previous sell signal.
  • Relative performance has been improving and is testing the 200-dma. 
  • XLU is getting close to triggering a buy signal which should correspond with improving performance. A risk-off trade should see a rotation to the sector. 
  • Short-Term Positioning: Neutral
    • Last week: Hold positions
    • This week: Hold positions
  • Long-Term Positioning: Bullish

Health Care

  • As noted last week, XLV was consolidating and we expected a breakout to the upside. 
  • We saw that last week, with a surge to 3-standard deviations above the moving average. With the buy signal now extremely overbought, corrections should be contained back to support where holdings can be added. 
  • The 200-dma is now important support and needs to hold, along with the previous tops going back to 2018. 
  • We are moving our stop to $96
  • Short-Term Positioning: Bullish
    • Last week: Hold positions
    • This week: Hold positions.
  • Long-Term Positioning: Bullish

Discretionary

  • AMZN is still driving this sector and the nearly 8% move higher on Monday pushed XLY to extremes.
  • With the buy signal at the highest level on record a correction is coming. It is just a function of time and catalyst.
  • Hold current positions but maintain your stop levels. We recommend taking profits.
  • Stop loss is set at $122.50
  • Short-Term Positioning: Bullish
    • Last week: No position
    • This week: No position
  • Long-Term Positioning: Neutral

Transportation

  • The rally in XTN is losing traction and failed at resistance and now is in a downtrend.
  • The sector is performing weakly so caution is advised. 
  • XTN is trying to hold support at the 50% retracement, but with earnings season approaching downside risk is mounting.
  • Stop loss set at $50
  • Short-Term Positioning: Neutral
    • Last week: Hold positions
    • This week: Hold positions
  • Long-Term Positioning: Bearish

Selected Portfolio Positions Review: 07-15-20

In this week’s selected portfolio positions review (07-15-20), we want to review a few of the trades we made recently. We also want to discuss a couple of positions we make take action on soon.

CVX – Added To Exposure

  • After building a position previously in CVX, we are adding to our exposure slightly for a couple of reasons.
  • The first is we like the value built up within the sector, and;
  • Secondly, energy has been a more defensive rotation area in the market.
  • Furthermore, with yields in excess of 6% we can afford to give these holdings some room to wrok as they come off deeply depressed levels.
  • Stop loss is at $75

XOM – Added To Exposure

  • Same as with CVX above.
  • Stop set at $37.50

DIA – Sold Position To Raise Cash

  • We sold DIA (2.5% position) to add to other positions in the portfolio. Overall, the equity allocation to the portfolio was only reduced slightly, but we built a bit more defensive position.

COST – Reduced Position To Take Profits

  • While we like our position in COST very much, the stock has literally gone parabolic over the last couple of weeks and is now 3-standard deviations overbought.
  • We reduced our position slightly and took in some gains.
  • On a correction back to the 200-dma, we will add back to our holdings.

CLX – Reduced Position To Take Profits

  • CLX has been a stellar performer since we added the position earlier this year. 
  • The COVID trades have been in favor, but with the extreme overbought condition we took profits for a second time this year after increasing exposure in June. 
  • Like COST, the 3-standard deviation extension will not last long.

CMCSA – Added To Holdings

  • In the same vane of the “work at home,” “COVID,” trades we added to our holdings in CMCSA.
  • We continue to like the position although it has underperformed the market as of late.
  • With the resurgence in the “virus” we suspect we will begin to see better performance as the rotation to these types of companies continues.

PG – Reduced Position To Take Profits

  • As with the others, we took profits in PG due to the extreme deviation and extension of the position. 
  • On a pullback to support we will add back to our holdings.
  • We have a stop on the position at $112.50.

WMT – Reduced Position To Take Profits

  • As with COST and PG, we took profits in WMT due to the extreme deviation from the mean.
  • On a pullback to support we will add back to the position, but we are okay for now with a slightly reduced holding due to the risk. 
  • Stop is set at $117.50

UPS – Reduced Position To Take Profits

  • Similar story with COST, PG and WMT.
  • The sharp advance in a very short-term period since adding the position, requires a bit of profit taking.
  • We like the position but need a pullback to add to holdings. 
  • Stop is set at $104

BLL – Added To Position

  • BLL is an industrial company, which makes aluminum cans.
  • With the virus gaining traction, individuals are consuming more at home, and channel checks show that BLL has been running at near capacity to meet demand. 
  • They are also considered an “essential business” so the threat of a shutdown is eliminated. 
  • We added a small position to start, with a stop at $67.5.  
  • We added to that position this week. 

Sector Buy/Sell Review: 07-14-20

Each week we produce a “Sector Buy/Sell Review” chart book of the S&P 500 sectors to review where money is flowing within the market as whole. This helps refine not only decision making about what to own and when, but what sectors to overweight or underweight to achieve better performance.

HOW TO READ THE SECTOR BUY/SELL REVIEW CHARTS

There are three primary components to each chart:

  • The price chart is in orange
  • Over Bought/Over Sold indicator is in gray in the background.
  • The Buy / Sell indicator is in blue.

When the gray indicator is at the TOP of the chart, there is typically more risk and less reward available at the current time. In other words, the best time to BUY is when the short-term condition is over-sold. Likewise when the buy/sell indicator is above the ZERO line investments have a tendency of working better than when below the zero line.

We added 2- and 3-standard deviation extensions from the 50-dma this week. We are back to “stupid” overbought on many levels. Caution is advised.

Basic Materials

  • As noted last week, XLB is too overbought currently to chase the sector further, but hold trading positions for now. However, stops should be moved up to $55.
  • Target for trade is $60-61
  • The sector looks weak overall so caution is advised as we head into earnings season.
  • Short-Term Positioning: Bullish
    • Last Week: No Positions
    • This Week: No Positions
  • Stop-Loss moved up to $55
  • Long-Term Positioning: Bearish

Communications

  • XLC broke out to new highs after holding support but quickly failed that breakout. 
  • There is downside risk currently, and the reversal yesterday is not encouraging.
  • The sector is VERY overbought so hold current positions, but I would not suggest chasing the sector at this juncture.
  • With the virus resurging, the more defensive quality of the sector should help.
  • We moved our stop to $52.
    • Short-Term Positioning: Bullish
    • Last Week: Hold positions
    • This Week: Hold positions
  • Long-Term Positioning: Neutral

Energy

  • The pullback in energy stocks has moved the sector back to oversold. We were a bit early adding to our holdings but we were close to the short-term bottom.
  • If the current levels can hold, we will look to add to our holdings of XOM and CVX.
  • We maintaining fairly close stops however.
  • Short-Term Positioning: Bullish
    • Last week: Hold positions
    • This week: Hold positions
  • Stop loss adjusted to $34.00
  • Long-Term Positioning: Bearish

Financials

  • Financials are back to underperforming and remain a sector to avoid currently.
  • Initial support was at $24, which was violated. Now that level will be tested as “resistance.” 
  • We have an alert set at $22 to start evaluating holdings, but we aren’t excited about the sector currently.
  • Earnings may provide a short term boost to the sector, which may prove a good time if you have to exit underwater positions.
  • Short-Term Positioning: Neutral
    • Last week: No position
    • This week: No position
  • Long-Term Positioning: Bearish

Industrials

  • Industrials bounced of support at the 50% retracement level and triggered a buy signal.
  • However, since then, the sector performance has not improved much. 
  • We may look to add a position if relative performance to the market improves but will do so with a tight stop. 
  • Short-Term Positioning: Neutral
    • Last week: No position.
    • This week: No position.
  • Long-Term Positioning: Bearish

Technology

  • Technology continues push higher as the “virus trade” is back on. However, on Monday there was a sharp reversal in the sector/
  • Technology stocks, and the Nasdaq, are extremely overbought. 
  • We are holding our positions currently, but as noted last week, we took profits and reduced our weightings slightly. 
  • The deviation above the moving averages will be resolved likely sooner than later. 
  • Short-Term Positioning: Bullish
    • Last week: Hold positions
    • This week: Reduced positioning slightly. See trade commentary.
    • Long-Term Positioning: Bullish

Staples

  • XLP has corrected, and after we added a bit more to our holdings for the defensive nature of the sector, the sector is close to triggering a buy signal.
  • As noted last week: “XLP is not overbought after working off the previous extension, so there is “fuel” for a further rally on a rotation trade. Look for a defense rotation to see a pickup in the sector.”
  • We saw that defensive rotation on over the last couple of sessions.
  • We are moving our stop-loss alert to $57 as our stop-level.
  • Short-Term Positioning: Bullish
    • Last week: Hold positions
    • This week: Hold positions
    • Long-Term Positioning: Bullish

Real Estate

  • Like XLP, XLRE has triggered a buy signal.
  • The sector is not grossly overbought and a further defensive rotation in the market should see this sector rally. However, that has yet to be much of the case. 
  • XLRE tested and failed the 200-dma again, turning us bearish on the sector for now. 
  • We have sold all our holdings for the time being until we get better clarity on the fundamental underpinnings.
  • Short-Term Positioning: Neutral
    • Last week: Hold positions
    • This week: Sold 100% of positions
    • Long-Term Positioning: Bullish

Utilities

  • XLU has been lagging but is working off its previous sell signal.
  • Relative performance has been improving however. 
  • XLU held support on the recent pullback, and looks set to move higher in the short-term.
  • We have an alert set at $54
  • Short-Term Positioning: Neutral
    • Last week: Hold positions
    • This week: Hold positions
  • Long-Term Positioning: Bullish

Health Care

  • XLV continues to consolidate. With a buy signal in place, a defensive rotation in the market could push the sector higher. 
  • The consolidation was needed following the massive rally from the lows. So, if the market begins to look for areas with better fundamentals for a catch up trade, XLV will likely be it. That is what we saw on Monday.
  • The 200-dma is now important support and needs to hold, along with the previous tops going back to 2018. 
  • We are moving our stop to $96
  • Short-Term Positioning: Bullish
    • Last week: Hold positions
    • This week: Hold positions.
  • Long-Term Positioning: Bullish

Discretionary

  • AMZN is still driving this sector, and that stock reversed sharply yesterday dragging the sector down with it.
  • The overall retail sector looks terrible from an earnings standpoint which starts this week. 
  • Hold current positions but maintain your stop levels. We recommend taking profits.
  • Stop loss is set at $122.50
  • Short-Term Positioning: Bullish
    • Last week: No position
    • This week: No position
  • Long-Term Positioning: Neutral

Transportation

  • The rally in XTN is losing traction and failed at resistance and now is in a downtrend.
  • The sector is performing weakly so caution is advised. 
  • XTN is trying to hold support at the 50% retracement, but with earnings season approaching downside risk is mounting.
  • Stop loss set at $50
  • Short-Term Positioning: Neutral
    • Last week: Hold positions
    • This week: Hold positions
  • Long-Term Positioning: Bearish

Selected Portfolio Positions Review: 07-08-20

In this week’s selected portfolio positions review (07-08-20), we want to review a few of the trades we made recently. We also want to discuss a couple of positions we make take action on soon.

AAPL – Apple, Inc. (Looking To Take Profits)

  • Over the last couple of years, we have bought AAPL, taken profits, added more on dips or breakouts.
  • With AAPL pushing into the 3-standard deviation overbought zone, like many of the market sectors, we are looking to reduce our position slightly to take in some of the gains. 
  • We will look for a pullback to add back to the position. 
  • Stop loss is at $310

NFLX – Netflix (Looking To Take Profits)

  • Like AAPL, we added to our holdings of NFLX previously.
  • Like AAPL the recent surge has taken the stock into an extreme overbought condition.
  • We are looking to reduce our position slightly and wait for a correction or consolidation to work off the extreme conditions to rebuild the holding. 
  • Stop set at $385

AMZN – Amazon, Inc.

  • Also, like AAPL, after adding to AMZN previously, the near vertical spike in the AMZN suggests that profit taking is prudent. 
  • We will look for an opportunity to rebuild the position on a pullback or consolidation.
  • Stop set at $2350.

AEP – American Electric Power (Reduced Holding)

  • AEP and DUK have both been good holdings for us in the past, but defensive positioning has lagged as of late weighing on overall portfolio performance.
  • We still like both of our holdings and suspect they will perform better during a market correction. However, in then meantime we reduce our positioning in both DUK and AEP by 1/3rd. 

CLX – Clorox Co.

  • CLX has been a stellar performer since we added the position earlier this year. 
  • The COVID trades have been in favor, but with the extreme overbought condition we took profits in CLX recently and rebalanced the position in portfolios.

CMCSA – Comcast Corp.

  • In the same vane of the “work at home,” “COVID,” trades we added to our holdings in CMCSA.
  • We continue to like the position although it has underperformed the market as of late.
  • With the resurgence in the “virus” we suspect we will begin to see better performance as the rotation to these types of companies continues.

CSCO – Cisco Systems

  • As with CMCSA, we also added to our position in CSCO recently for virus play. 
  • CSCO is a bit overbought, but holding support at the 200-dma. 
  • We have a stop on the position at $40.

MSFT – Microsoft Corp. (Looking To Take Profits)

  • As with AAPL, AMZN, and NFLX, we are looking to take profits in MSFT at some point soon. 
  • The position is extremely overbought and extended, so a correction is likely. 
  • We like the position long-term, but valuations are very stretched currently. 

INTC – Intel Corp.

  • After adding INTC, we were unable to gain traction on the position and we were stopped out.

BLL – Ball Corp.

  • BLL is an industrial company, which makes aluminum cans.
  • With the virus gaining traction, individuals are consuming more at home, and channel checks show that BLL has been running at near capacity to meet demand. 
  • They are also considered an “essential business” so the threat of a shutdown is eliminated. 
  • We have added a small position to start, with a stop at $67.5

Sector Buy/Sell Review: 07-07-20

Each week we produce a “Sector Buy/Sell Review” chart book of the S&P 500 sectors to review where money is flowing within the market as whole. This helps refine not only decision making about what to own and when, but what sectors to overweight or underweight to achieve better performance.

HOW TO READ THE SECTOR BUY/SELL REVIEW CHARTS

There are three primary components to each chart:

  • The price chart is in orange
  • Over Bought/Over Sold indicator is in gray in the background.
  • The Buy / Sell indicator is in blue.

When the gray indicator is at the TOP of the chart, there is typically more risk and less reward available at the current time. In other words, the best time to BUY is when the short-term condition is over-sold. Likewise when the buy/sell indicator is above the ZERO line investments have a tendency of working better than when below the zero line.

We added 2- and 3-standard deviation extensions from the 50-dma this week. We are back to “stupid” overbought on many levels. Caution is advised.

Basic Materials

  • As noted last week, XLB held support at $54, but remains very overbought short-term, however, trading positions could be added with a tight stop at $54. 
  • XLB is too overbought currently to chase the sector further, but hold trading positions for now.
  • Target for trade is $60-61
  • The sector looks weak overall so caution is advised as we head into earnings season.
  • Short-Term Positioning: Bullish
    • Last Week: No Positions
    • This Week: No Positions
  • Stop-Loss set at $54
  • Long-Term Positioning: Bearish

Communications

  • XLC has resumed its rally and is looking to breakout to new highs after holding support. 
  • The sector is VERY overbought so hold current positions, but I would not suggest chasing the sector at this juncture.
  • With the virus resurging, the more defensive quality of the sector is attracting flows.
  • We moved our stop to $52.
    • Short-Term Positioning: Bullish
    • Last Week: Hold positions
    • This Week: Hold positions
  • Long-Term Positioning: Neutral

Energy

  • The pullback in energy stocks has moved the sector back to oversold. We were a bit early adding to our holdings but we were close to the short-term bottom.
  • If support can hold here, our positions should play out.
  • We maintaining fairly close stops however.
  • Short-Term Positioning: Bullish
    • Last week: Hold positions
    • This week: Hold positions
  • Stop loss adjusted to $35.00
  • Long-Term Positioning: Bearish

Financials

  • Financials are back to underperforming and remain a sector to avoid currently.
  • Initial support was at $24, which was violated. Now that level will be tested as “resistance.” 
  • We have an alert set at $22 to start evaluating holdings, but we aren’t excited about the sector currently.
  • Short-Term Positioning: Neutral
    • Last week: No position
    • This week: No position
  • Long-Term Positioning: Bearish

Industrials

  • Industrials bounced of support at the 50% retracement level and triggered a buy signal. Sector performance has improved as well.
  • The sector has triggered a “buy signal” but is short-term overbought. 
  • Positions can be added with a stop at $56
  • Short-Term Positioning: Bullish
    • Last week: No position.
    • This week: No position.
  • Long-Term Positioning: Bearish

Technology

  • Technology continues push higher as the “virus trade” is back on. 
  • Technology stocks, and the Nasdaq, are extremely overbought. 
  • We are holding our positions currently, but would not add further to the sector until you get a correction. 
  • The deviation above the moving averages will be resolved likely sooner than later. 
  • Short-Term Positioning: Bullish
    • Last week: Hold positions
    • This week: Hold positions.
    • Long-Term Positioning: Bullish

Staples

  • XLP has corrected, and after we added a bit more to our holdings for the defensive nature of the sector, the sector is close to triggering a buy signal.
  • XLP is not overbought after working off the previous extension, so there is “fuel” for a further rally on a rotation trade. Look for a defense rotation to see a pickup in the sector. 
  • We are moving our stop-loss alert to $55 as our stop-level.
  • Short-Term Positioning: Bullish
    • Last week: Hold positions
    • This week: Hold positions
    • Long-Term Positioning: Bullish

Real Estate

  • Like XLP, XLRE has triggered a buy signal.
  • The sector is not grossly overbought and a further defensive rotation in the market should see this sector rally. 
  • XLRE is looking to test the 200-dma, and a break above that level would be bullish short-term.
  • We have moved our stop to $33.
  • Short-Term Positioning: Neutral
    • Last week: Hold positions
    • This week: Hold positions.
    • Long-Term Positioning: Bullish

Utilities

  • XLU has been lagging but is working off its previous sell signal.
  • The sector is currently underperforming the market as a hole, but there is some relative value and dividends in the sector.
  • XLU held support on the recent pullback, and looks set to move higher in the short-term.
  • We have an alert set at $54
  • Short-Term Positioning: Neutral
    • Last week: Hold positions
    • This week: Hold positions
  • Long-Term Positioning: Bullish

Health Care

  • XLV continues to consolidate. With a buy signal in place, a defensive rotation in the market could push the sector higher.
  • The consolidation was needed following the massive rally from the lows. So, if the market begins to look for areas with better fundamentals for a catch up trade, XLV will likely be it.
  • The 200-dma is now important support and needs to hold, along with the previous tops going back to 2018. 
  • We have an alert set at $95 as a stop.
  • Short-Term Positioning: Bullish
    • Last week: Hold positions
    • This week: Hold positions.
  • Long-Term Positioning: Bullish

Discretionary

  • AMZN is still driving this sector. The overall retail sector looks terrible from an earnings standpoint, but for now, the sector is AMZN. 
  • Hold current positions but maintain your stop levels.
  • Stop loss is set at $122.50
  • Short-Term Positioning: Bullish
    • Last week: No position
    • This week: No position
  • Long-Term Positioning: Neutral

Transportation

  • The rally in XTN is losing traction and failed at resistance and now is in a downtrend.
  • The sector is performing weakly so caution is advised. 
  • XTN failed the 50% correction retracement level so there is mounting risk it will fail this support level.
  • Stop loss set at $50
  • Short-Term Positioning: Neutral
    • Last week: Hold positions
    • This week: Hold positions
  • Long-Term Positioning: Bearish

Sector Buy/Sell Review: 06-30-20

Each week we produce a “Sector Buy/Sell Review” chart book of the S&P 500 sectors to review where money is flowing within the market as whole. This helps refine not only decision making about what to own and when, but what sectors to overweight or underweight to achieve better performance.

HOW TO READ THE SECTOR BUY/SELL REVIEW CHARTS

There are three primary components to each chart:

  • The price chart is in orange
  • Over Bought/Over Sold indicator is in gray in the background.
  • The Buy / Sell indicator is in blue.

When the gray indicator is at the TOP of the chart, there is typically more risk and less reward available at the current time. In other words, the best time to BUY is when the short-term condition is over-sold. Likewise when the buy/sell indicator is above the ZERO line investments have a tendency of working better than when below the zero line.

We added 2- and 3-standard deviation extensions from the 50-dma this week. We are back to “stupid” overbought on many levels. Caution is advised.

Basic Materials

  • As noted last week, XLB held support at $54, but remains very overbought short-term.
  • Trading positions can be added with a tight stop at $54. 
  • The sector looks weak overall so caution is advised as we head into earnings season.
  • Short-Term Positioning: Bullish
    • Last Week: No Positions
    • This Week: No Positions
  • Stop-Loss set at $54
  • Long-Term Positioning: Bearish

Communications

  • XLC has continued to correct its very overbought condition. We took some profits previously. 
  • We continue to like the more defensive quality of the sector. We have been looking for a pullback to $51 to add to our holdings. We are approaching that level.  
  • We moved our alert to $51 to revisit adding to our holdings.
    • Short-Term Positioning: Bullish
    • Last Week: Hold positions
    • This Week: Hold positions
  • Long-Term Positioning: Neutral

Energy

  • The pullback in energy stocks has moved the sector back to oversold. We were a bit early adding to our holdings but we were close to the short-term bottom.
  • If support can hold here, our positions should play out.
  • We maintaining fairly close stops however.
  • Short-Term Positioning: Bullish
    • Last week: Hold positions
    • This week: Hold positions
  • Stop loss adjusted to $36.00
  • Long-Term Positioning: Bearish

Financials

  • Financials are back to underperforming and remain a sector to avoid currently.
  • Initial support was at $24, which was violated. Now that level of tested as “resistance.” 
  • We have an alert set at $22 to start evaluating holdings, but we aren’t excited about the sector currently.
  • Short-Term Positioning: Neutral
    • Last week: No position
    • This week: No position
  • Long-Term Positioning: Bearish

Industrials

  • Industrials bounced of support at the 50% retracement level and triggered a buy signal. Sector performance has improved as well.
  • We are now looking for an opportunity to add exposure. The sector remains very overbought.short-term but we may get a good entry point here soon.
  • Short-Term Positioning: Bullish
    • Last week: No position.
    • This week: No position.
  • Long-Term Positioning: Bearish

Technology

  • Technology continues push higher and we continue to hold our exposure to the sector.
  • The rally had started to fade a bit, but money quickly rotated back into the sector.
  • As stated previously: “We added to our holdings for a rotation trade out of Materials, Financials, and Industrials back to liquidity and fundamental balance sheet strength.”  
  • We remain long the sector currently. We need a decent pullback to add more exposure.
  • Short-Term Positioning: Bullish
    • Last week: Hold positions
    • This week: Hold positions.
    • Long-Term Positioning: Bullish

Staples

  • XLP has corrected, and and after we added a bit more to our holdings for the defensive nature of the sector, the sector is close to triggering a buy signal.
  • XLP is not overbought after working off the previous extension, so there is “fuel” for a further rally on a rotation trade. Look for an offense to defense rotation to see a pickup in the sector. 
  • We are moving our stop-loss alert to $55 as our stop-level.
  • Short-Term Positioning: Bullish
    • Last week: Hold positions
    • This week: Hold positions
    • Long-Term Positioning: Bullish

Real Estate

  • Like XLP, XLRE is very close to triggering a buy signal.
  • The sector is not grossly overbought and a further defensive rotation in the market should see this sector rally. 
  • XLRE failed a second time at the 200-dma, however, if there is a risk-off rotation in the market we should see the sector gain some traction. 
  • We have $31 as our stop-loss level.
  • Short-Term Positioning: Neutral
    • Last week: Hold positions
    • This week: Hold positions.
    • Long-Term Positioning: Bullish

Utilities

  • XLU has been lagging but is working off its previous sell signal.
  • We previously added some exposure again to the sector in anticipation of the risk rotation into more defensive names. 
  • If there is further weakness in the market over the next few weeks, we will likely see a rotation in to XLU for defense and safety. 
  • We have an alert set at $54
  • Short-Term Positioning: Bullish
    • Last week: Hold positions
    • This week: Hold positions
  • Long-Term Positioning: Bullish

Health Care

  • XLV has been consolidating over the last several weeks. With the previous sell signal heading higher, a defensive rotation in the market could push the sector higher.
  • The consolidation was needed following the massive rally from the lows.
  • The 200-dma is now important support and needs to hold, along with the previous tops going back to 2018. 
  • We have an alert set at $95 as a stop.
  • Short-Term Positioning: Bullish
    • Last week: Hold positions
    • This week: Hold positions.
  • Long-Term Positioning: Bullish

Discretionary

  • AMZN is still driving this sector. The overall retail sector looks terrible and with earnings coming we are looking for weakness in the sector..
  • Hold current positions but maintain your stop levels.
  • Stop loss is set at $122.50
  • Short-Term Positioning: Bullish
    • Last week: No position
    • This week: No position
  • Long-Term Positioning: Neutral

Transportation

  • The rally in XTN is losing traction and failing at resistance.
  • The sector is performing weakly so caution is advised. 
  • XTN failed the 50% correction retracement level so there is mounting risk it will fail this support level.
  • Stop loss set at $50
  • Short-Term Positioning: Neutral
    • Last week: Hold positions
    • This week: Hold positions
  • Long-Term Positioning: Bearish

Sector Buy/Sell Review: 06-23-20

Each week we produce a “Sector Buy/Sell Review” chart book of the S&P 500 sectors to review where money is flowing within the market as whole. This helps refine not only decision making about what to own and when, but what sectors to overweight or underweight to achieve better performance.

HOW TO READ THE SECTOR BUY/SELL REVIEW CHARTS

There are three primary components to each chart:

  • The price chart is in orange
  • Over Bought/Over Sold indicator is in gray in the background.
  • The Buy / Sell indicator is in blue.

When the gray indicator is at the TOP of the chart, there is typically more risk and less reward available at the current time. In other words, the best time to BUY is when the short-term condition is over-sold. Likewise when the buy/sell indicator is above the ZERO line investments have a tendency of working better than when below the zero line.

We added 2- and 3-standard deviation extensions from the 50-dma this week. We are back to “stupid” overbought on many levels. Caution is advised.

Basic Materials

  • As noted last week, XLB held support at $54, but remains very overbought short-term.
  • Trading positions can be added with a tight stop at $54.
  • Short-Term Positioning: Bullish
    • Last Week: No Positions
    • This Week: No Positions
  • Stop-Loss set at $54
  • Long-Term Positioning: Bearish

Communications

  • Even with the correction last week, XLC remains very overbought. We took some profits previously. 
  • We continue to like the more defensive quality of the sector, so we continue to look for a pullback to add back to our holdings. We haven’t had enough of a correction to generate an entry point.
  • We moved our alert to $51 to revisit adding to our holdings.
    • Short-Term Positioning: Bullish
    • Last Week: Hold positions
    • This Week: Hold positions
  • Long-Term Positioning: Neutral

Energy

  • As noted last week, the pullback in energy stocks came last week, and after taking profits we are looking for a buyable entry point to add back into our current holdings. 
  • If support can hold here, we can add to our current holdings.
  • Short-Term Positioning: Bullish
    • Last week: Hold positions
    • This week: Hold positions
  • Stop loss adjusted to $37.50
  • Long-Term Positioning: Bearish

Financials

  • The surge in XLF came and went. Now financials are back to underperforming
  • Initial support was at $24, which was violated. Now that level of tested as “resistance.” 
  • We have an alert set at $23 to start evaluating holdings, but we aren’t excited about the sector currently.
  • Short-Term Positioning: Neutral
    • Last week: No position
    • This week: No position
  • Long-Term Positioning: Bearish

Industrials

  • Last week we noted that “XLI is playing catch-up with the market, and the move last week is a gross extension. It will correct and likely sharply.” 
  • The suggestion to take profits and rebalance holdings accordingly worked out well. Now, we can look for an opportunity to add exposure. The sector remains very overbought.
  • However, if we get a bit more consolidation, trading positions can be added with a stop at $66.
  • Short-Term Positioning: Bullish
    • Last week: No position.
    • This week: No position.
  • Long-Term Positioning: Bearish

Technology

  • Technology continues push higher and we continue to hold our exposure to the sector.
  • The rally had started to fade a bit, but money quickly rotated back into the sector. 
  • As stated last week: “We added to our holdings for a rotation trade out of Materials, Financials, and Industrials back to liquidity and fundamental balance sheet strength.”  
  • That was precisely what occurred.
  • Short-Term Positioning: Bullish
    • Last week: Hold positions
    • This week: Hold positions.
    • Long-Term Positioning: Bullish

Staples

  • Last week, we noted that XLP corrected, and that we added a bit more to our holdings for the defensive nature of the sector. 
  • XLP is not overbought after working off the previous extension, so there is “fuel” for a further rally on a rotation trade. Look for an offense to defense rotation to see a pickup in the sector. 
  • We are moving our stop-loss alert to $55 as our stop-level.
  • Short-Term Positioning: Bullish
    • Last week: Hold positions
    • This week: Hold positions
    • Long-Term Positioning: Bullish

Real Estate

  • XLRE broke out above the 200-dma but failed last week with the broad market selloff.
  • The sector is not grossly overbought and a further defensive rotation in the market should see this sector rally. 
  • XLRE failed a second time at the 200-dma, however, if there is a risk-off rotation in the market we should see the sector gain some traction. 
  • We have $31 as our stop-loss level.
  • Short-Term Positioning: Neutral
    • Last week: Hold positions
    • This week: Hold positions.
    • Long-Term Positioning: Bullish

Utilities

  • XLU held support on Monday and rallied slightly off the 50% correction retracement.
  • We previously added some exposure again to the sector in anticipation of the risk rotation into more defensive names. 
  • If there is further weakness in the market over the next few weeks, we will likely see a rotation in to XLU for defense and safety. 
  • We have an alert set at $54
  • Short-Term Positioning: Bullish
    • Last week: Hold positions
    • This week: Hold positions
  • Long-Term Positioning: Bullish

Health Care

  • We noted previously that XLV was “not extremely overbought, and we added to our holdings for a rotation trade out of the sectors that have gotten over-extended over the last two weeks.”
  • XLV continues to consolidate in a fairly tight range, and rallied on Monday. 
  • We are still looking for XLV to pick up with a defensive rotation in the market. The consolidation was needed following the massive rally from the lows.
  • The 200-dma is now important support and needs to hold, along with the previous tops going back to 2018. 
  • We have an alert set at $95 as a stop.
  • Short-Term Positioning: Bullish
    • Last week: Hold positions
    • This week: Hold positions.
  • Long-Term Positioning: Bullish

Discretionary

  • As noted last week: “The pullback occurred, and support held at the 2019 peaks. The fundamentals aren’t great for the sector overall, but the pullback does provide an entry point for trading positions. 
  • Buy at current levels with a stop at $122.50
  • Stop loss is set at $122.50
  • Short-Term Positioning: Bullish
    • Last week: No position
    • This week: No position
  • Long-Term Positioning: Neutral

Transportation

  • The rally in XTN is coming to a conclusion after a previous sharp advance.
  • There is a trading opportunity for transports, but the sector is performing weakly so caution is advised. 
  • XTN is holding the 50% correction retracement level so far, but there is mounting risk it will fail this support level.
  • Stop loss set at $50
  • Short-Term Positioning: Neutral
    • Last week: Hold positions
    • This week: Hold positions
  • Long-Term Positioning: Bearish

Sector Buy/Sell Review: 06-16-20

Each week we produce a “Sector Buy/Sell Review” chart book of the S&P 500 sectors to review where money is flowing within the market as whole. This helps refine not only decision making about what to own and when, but what sectors to overweight or underweight to achieve better performance.

HOW TO READ THE SECTOR BUY/SELL REVIEW CHARTS

There are three primary components to each chart:

  • The price chart is in orange
  • Over Bought/Over Sold indicator is in gray in the background.
  • The Buy / Sell indicator is in blue.

When the gray indicator is at the TOP of the chart, there is typically more risk and less reward available at the current time. In other words, the best time to BUY is when the short-term condition is over-sold. Likewise when the buy/sell indicator is above the ZERO line investments have a tendency of working better than when below the zero line.

We added 2- and 3-standard deviation extensions from the 50-dma this week. We are back to “stupid” overbought on many levels. Caution is advised.

Basic Materials

  • As noted last week, “This is a catch up, momentum, rotation trade that will end quickly. Take profits and rebalance risk accordingly.” That correction came swiftly on Thursday.
  • XLB held support at $54, but remains very overbought short-term.
  • Trading positions can be added with a tight stop at $54.
  • Short-Term Positioning: Bullish
    • Last Week: No Positions
    • This Week: No Positions
  • Stop-Loss set at $54
  • Long-Term Positioning: Bearish

Communications

  • Even with the correction last week, XLC remains very overbought. We took some profits previously. 
  • We continue to like the more defensive quality of the sector, so we continue to look for a pullback to add back to our holdings.
  • We moved our alert to $51 to revisit adding to our holdings.
    • Short-Term Positioning: Bullish
    • Last Week: Hold positions
    • This Week: Hold positions
  • Long-Term Positioning: Neutral

Energy

  • As noted last week: “Energy stocks are now extremely overbought short-term and a pullback is coming and likely soon.”
  • That pullback came last week, and after taking profits we are looking for a buyable entry point to add back into our current holdings. 
  • Short-Term Positioning: Bullish
    • Last week: Hold positions
    • This week: Hold positions
  • Stop loss adjusted to $37.50
  • Long-Term Positioning: Bearish

Financials

  • As noted previously: “That move [in XLF] is more than 3-standard deviations extended so take profits and reduce weightings.”
  • That was good advice as financials were hit hard last week. Now they are once again struggling with resistance. 
  • Initial support was at $24, which was violated. And there is still a potential for a further correction back to $22.
  • We have an alert set at $23 to start evaluating holdings.
  • Short-Term Positioning: Neutral
    • Last week: No position
    • This week: No position
  • Long-Term Positioning: Bearish

Industrials

  • Last week we noted that “XLI is playing catch-up with the market, and the move last week is a gross extension. It will correct and likely sharply.” 
  • The suggestion to take profits and rebalance holdings accordingly worked out well. Now, we can look for an opportunity to add exposure. The sector remains very overbought.
  • Short-Term Positioning: Bullish
    • Last week: No position.
    • This week: No position.
  • Long-Term Positioning: Bearish

Technology

  • Technology continues push higher and we continue to hold our exposure to the sector.
  • As noted last week: “The rally is starting to fade here a bit as the sector runs into the bottom of the uptrend line from the July 2017 lows. However, unlike every other sector, it is not grossly overbought.”
  • Importantly, we stated “We added to our holdings on Monday for a rotation trade out of Materials, Financials, and Industrials back to liquidity and fundamental balance sheet strength.”  
  • That was precisely what occurred and portfolios were shielded against the decline.
  • Short-Term Positioning: Bullish
    • Last week: Hold positions
    • This week: Hold positions.
    • Long-Term Positioning: Bullish

Staples

  • Last week, XLP corrected and on Friday we added a bit more to our holdings for the defensive nature of the sector. 
  • XLP is not overbought after working off the previous extension, so there is “fuel” for a further rally on a rotation trade. Look for an offense to defense rotation to see a pickup in the sector. 
  • We are moving our stop-loss alert to $55 as our stop-level.
  • Short-Term Positioning: Bullish
    • Last week: Hold positions
    • This week: Hold positions
    • Long-Term Positioning: Bullish

Real Estate

  • XLRE broke out above the 200-dma but failed last week with the broad market selloff.
  • The sector is not grossly overbought and a further defensive rotation in the market should see this sector rally. 
  • We have a low limit alert at $31 as our stop-loss level.
  • Short-Term Positioning: Neutral
    • Last week: Hold positions
    • This week: Hold positions.
    • Long-Term Positioning: Bullish

Utilities

  • As with XLRE, XLU also held support on the sell-off last week. 
  • We previously added some exposure again to the sector in anticipation of the risk rotation into more defensive names. 
  • If there is further weakness in the market over the next few weeks, we will likely see a rotation in to XLU for defense and safety. 
  • We have an alert set at $58
  • Short-Term Positioning: Bullish
    • Last week: Hold positions
    • This week: Hold positions
  • Long-Term Positioning: Bullish

Health Care

  • We noted previously that XLV was “not extremely overbought, and we added to our holdings for a rotation trade out of the sectors that have gotten over-extended over the last two weeks.”
  • On Thursday, XLV was sold off with the rest of the market, but is now very oversold relative to the market as a whole. 
  • We are still looking for XLV to pick up with a defensive rotation in the market. However, XLV has had a phenomenal run from the lows, so the recent pullback was not unwarranted.
  • The 200-dma is now important support and needs to hold, along with the previous tops going back to 2018. 
  • We have an alert set at $95 as a stop.
  • Short-Term Positioning: Bullish
    • Last week: Hold positions
    • This week: Hold positions.
  • Long-Term Positioning: Bullish

Discretionary

  • As noted last week: “Discretionary performance is now just “crazy” overbought and it is primarily AMZN driving the sector higher. We added to our AMZN holdings with its breakout to all-time highs. The sector is VERY overbought, so a pullback is likely. So, use pullbacks to add exposure but beware of the more extreme extension.”
  • The pullback occurred, and support held at the 2019 peaks. The fundamentals aren’t great for the sector overall, but the pullback does provide an entry point for trading positions. 
  • Buy at current levels with a stop at $122.50
  • Stop loss is set at $122.50
  • Short-Term Positioning: Bullish
    • Last week: No position
    • This week: No position
  • Long-Term Positioning: Neutral

Transportation

  • As noted last week: “XTN finally broke out and rallied on a catchup trade with the other fundamentally weak sectors of the market. There is a trading opportunity for transports, but the sector is very overbought and extended. Look for a pullback to $52 for a trading entry.”
  • XTN bounced at $52 so a trading entry can be made with a target of $58 and a stop of $50.
  • Stop loss set at $50
  • Short-Term Positioning: Neutral
    • Last week: No position
    • This week: Added IYT to the portfolio.
  • Long-Term Positioning: Bearish

Selected Portfolio Positions Review: 06-10-20

In this week’s selected portfolio positions review, we want to review a few of the trades we made on Monday. As noted in yesterday’s post, “It’s time to take on defensive positioning,” I stated:

“With the vast majority of stocks being above the 50- and 200-dma moving averages, all short-term momentum indicators are now egregiously overbought. As noted by the vertical red lines, when every measure is at historically overbought levels, corrections are frequent.”

Defensive positioning, Technically Speaking: It’s Time To Take On Defensive Positioning

The crux of the article is the discussion of these extreme conditions and the potential for a “risk-off” trade. Which led us to our latest actions:

“While we did increase our exposure to the markets yesterday, as the bullish trend continues, we did so in more “defensive” areas. With the momentum “junk” trade now very extended, we should see a rotation back into utilities, real estate, health care, and technology. (Which may already be underway.)”

In today’s position review, I will review a few of our recent adds and the reasoning.

AAPL – Apple, Inc.

  • Over the last couple of years, we have bought AAPL, taken profits, added more on dips or breakouts.
  • On Monday, we increased our holdings in AAPL to catch a “risk-off” rotation out of the momentum chase in fundamentally poor quality stocks.
  • With AAPL not in the 3-standard deviation overbought zone, like many of the market sectors, and with a high liquidity ratio, we expect money to “hide” in Apple during a rotation. 
  • Stop loss is at $310

NFLX – Netflix

  • Like AAPL, we added to our holdings of NFLX. The stock has built a consolidation over the last month. 
  • A breakout to all-time highs is likely on a rally, and we can maintain a tight stop loss due to our recent entry point on the position.
  • Stop set at $385

AMZN – Amazon, Inc.

  • We added AMZN on Monday, expecting a breakout in the position on a “risk-off” rotation out of the momentum chase. That breakout occurred on Tuesday. 
  • Like AAPL, AMZN is a high liquidity, very visible, stock for major funds to own. With low liquidity in many areas of the market, AAPL, AMZN, and NFLX provide an “easy in, easy out” trade. 
  • AMZN is overbought now, but not yet trading to the top of its Bollinger bands, so there may be more room after yesterday’s surge.
  • Stop set at $2350.

ABBV – Abbievie Inc.

  • ABBV has been a steady winner since last year; we have bought and sold the position a couple of times, taking profits. 
  • The position is on the risk-off rotation play and is close to breaking out above the previous high from February of this year. Our short-term target is $100 if that happens. 
  • Stop set at $87.50

TLT – 20-Year Bond ETF

As I noted in yesterday’s report:

As opposed to the S&P 500, bonds are more than 3-standard deviations oversold. On Friday, bonds began a reversal rally. We recently added to our positions to take advantage of a risk rotation.)

Importantly, was this supporting view of our position.

“Even if we get a V-shaped recovery, we are going to be stuck in a deflationary pricing situation for a very long time. You have one-in-five Americans either unemployed or underemployed even after what was a blockbuster jobs report. There is still too much idle capacity to be bidding up inflationary expectations at the moment.

That’s why Treasuries are a very good buy right now.” – David Rosenberg

We remain long bonds at this point for a hedge against our equity risk and rotation from the “risk-on” trade that has gotten the markets way ahead of itself. A short-term reversal is likely. 

Sector Buy/Sell Review: 06-09-20

Each week we produce a “Sector Buy/Sell Review” chart book of the S&P 500 sectors to review where money is flowing within the market as whole. This helps refine not only decision making about what to own and when, but what sectors to overweight or underweight to achieve better performance.

HOW TO READ THE SECTOR BUY/SELL REVIEW CHARTS

There are three primary components to each chart:

  • The price chart is in orange
  • Over Bought/Over Sold indicator is in gray in the background.
  • The Buy / Sell indicator is in blue.

When the gray indicator is at the TOP of the chart, there is typically more risk and less reward available at the current time. In other words, the best time to BUY is when the short-term condition is over-sold. Likewise when the buy/sell indicator is above the ZERO line investments have a tendency of working better than when below the zero line.

We added 2- and 3-standard deviation extensions from the 50-dma this week. We are back to “stupid” overbought on many levels. Caution is advised.

Basic Materials

  • As noted last week, XLB remains extremely overbought. Despite the rally, the sector is still a long-term under performer relative to the S&P 500.
  • This is a catch up, momentum, rotation trade that will end quickly. Take profits and rebalance risk accordingly. 
  • As stated last week, the trade got away from us, so we will need to wait for a pullback to support to add materials to the portfolio.
  • We raising our trading alert to $56
  • Short-Term Positioning: Bullish
    • Last Week: No Positions
    • This Week: No Positions
  • Long-Term Positioning: Bearish

Communications

  • XLC continues to perform better than the overall market. 
  • We added to this sector previously as the 200-dma retracement level was taken out. However, it is extremely overbought and we took some profits previously. 
  • We continue to like the more defensive quality of the sector, so we continue to look for a pullback to add back to our holdings.
  • We moved our alert to $51 to revisit adding to our holdings.
    • Short-Term Positioning: Bullish
    • Last Week: Hold positions
    • This Week: Hold positions
  • Long-Term Positioning: Neutral

Energy

  • Energy stocks are now extremely overbought short-term and a pullback is coming and likely soon.
  • We added to our holdings previously by increasing exposure in XOM and CVX in the equity model and adding those two positions to the ETF model. 
  • We have a stop-loss alert set at $42.50, with a high-alert set at $50. The sector is 3-standard deviations above the mean, so caution is advised.
  • Short-Term Positioning: Bullish
    • Last week: Hold positions
    • This week: Hold positions
    • Stop loss adjusted to $42.50
  • Long-Term Positioning: Bearish

Financials

  • Financials have lagged the bear market rally badly, but that performance turned up sharply last week on a rotation chase. That move is more than 3-standard deviations extended so take profits and reduce weightings.
  • Initial support is $24, but a correction back to $22 is likely.
  • We have an alert set at $23 to start evaluating holdings.
  • Short-Term Positioning: Neutral
    • Last week: No position
    • This week: No position
  • Long-Term Positioning: Bearish

Industrials

  • XLI had a good rally last week and finally broke out of its consolidation. XLI is playing catch-up with the market, and the move last week is a gross extension. It will correct and likely sharply. 
  • Take profits and rebalance holdings accordingly. 
  • We have moved our alert to $62 to evaluate positions
  • Short-Term Positioning: Bullish
    • Last week: No position.
    • This week: No position.
  • Long-Term Positioning: Bearish

Technology

  • Technology continues push higher and we continue to hold our exposure to the sector.
  • The rally is starting to fade here a bit as the sector runs into the bottom of the uptrend line from the July 2017 lows. However, unlike every other sector, it is not grossly overbought.
  • We added to our holdings on Monday for a rotation trade out of Materials, Financials, and Industrials back to liquidity and fundamental balance sheet strength. 
  • We have moved our alert to $95
  • Short-Term Positioning: Bullish
    • Last week: Hold positions
    • This week: Hold positions.
    • Long-Term Positioning: Bullish

Staples

  • After adding to XLP recently, it started a move and broke above the 200-dma.
  • XLP is not overbought after working off the previous extension, so there is “fuel” for a further rally on a rotation trade. 
  • We are moving our stop-loss alert to $55 as our stop-level.
  • Short-Term Positioning: Bullish
    • Last week: Hold positions
    • This week: Hold positions
    • Long-Term Positioning: Bullish

Real Estate

  • We noted previously, that XLRE held support at the 38.2% retracement and rallied. We also added some exposure to our holdings previously. 
  • XLRE has broken out and is now being chased higher. We added some exposure to the sector for a rotation trade on Monday with a bet bond yields are about to pull back. 
  • We have a low limit alert at $31 as our stop-loss level.
  • Short-Term Positioning: Neutral
    • Last week: Hold positions
    • This week: Hold positions.
    • Long-Term Positioning: Bullish

Utilities

  • XLU also held support at the 38.2% retracement level and turned up and now broke out above the 200-dma.
  • We added some exposure again to the sector as we look for a rotation into more defensive names. 
  • There should be a relative “risk off” safety trade with XLU if we see a pullback in the broader market.
  • We have an alert set at $58
  • Short-Term Positioning: Bullish
    • Last week: Hold positions
    • This week: Added to positions.
  • Long-Term Positioning: Bullish

Health Care

  • XLV neared all-time highs and consolidated. Late last week, it broke out of that consolidation near all-time highs and is challenging those levels. 
  • Given the sector is not extremely overbought, we added to our holdings for a rotation trade out of the sectors that have gotten over-extended over the last two weeks.
  • The 200-dma is now important support and needs to hold, along with the previous tops going back to 2018. 
  • We have an alert set at $95 as a stop.
  • Short-Term Positioning: Bullish
    • Last week: Hold positions
    • This week: Hold positions.
  • Long-Term Positioning: Bullish

Discretionary

  • Discretionary performance is now just “crazy” overbought and it is primarily AMZN driving the sector higher. We added to our AMZN holdings with its breakout to all-time highs.
  • The sector is VERY overbought, so a pullback is likely. So, use pullbacks to add exposure but beware of the more extreme extension.
  • Stop loss is set at $122.50
  • Short-Term Positioning: Bullish
    • Last week: No position
    • This week: No position
  • Long-Term Positioning: Neutral

Transportation

  • The sector finally broke out and rallied on a catchup trade with the other fundamentally weak sectors of the market. 
  • The sector performance has improved but still lags the broader market. 
  • There is a trading opportunity for transports, but the sector is very overbought and extended. Look for a pullback to $52 for a trading entry. 
  • We are moving our trading alert level to $52 and will add to our holdings accordingly. 
  • Short-Term Positioning: Neutral
    • Last week: No position
    • This week: Added IYT to the portfolio.
  • Long-Term Positioning: Bearish

Sector Buy/Sell Review: 06-02-20

Each week we produce a “Sector Buy/Sell Review” chart book of the S&P 500 sectors to review where money is flowing within the market as whole. This helps refine not only decision making about what to own and when, but what sectors to overweight or underweight to achieve better performance.

HOW TO READ THE SECTOR BUY/SELL REVIEW CHARTS

There are three primary components to each chart:

  • The price chart is in orange
  • Over Bought/Over Sold indicator is in gray in the background.
  • The Buy / Sell indicator is in blue.

When the gray indicator is at the TOP of the chart, there is typically more risk and less reward available at the current time. In other words, the best time to BUY is when the short-term condition is over-sold. Likewise when the buy/sell indicator is above the ZERO line investments have a tendency of working better than when below the zero line.

NEW PORTFOLIO TOOL:  Under the PORTFOLIO tab you will see a new tool called ALERTS. When you click on the link, any position that you in a WATCHLIST or PORTFOLIO will show up in the ALERTS window.  You can add SELL TARGETS, STOP LOSS, and Daily % Changes. When those levels are triggered, you will be sent an email and the alerts will show on your dashboard. 

We are using this system for all our current positions and will be reporting our targets in these daily updates.

Basic Materials

  • As noted last week, XLB reclaimed the 61.8% retracement, but remains overbought, and was underperforming the market. However, over the last week, the performance improved markedly. 
  • The trade got away from us, so we will need to wait for a pullback to support to add materials to the portfolio.
  • If you are long Materials, the fundamentals remain poor so maintain a tight stop.
  • We raising our trading alert to $53.
  • Short-Term Positioning: Bullish
    • Last Week: No Positions
    • This Week: No Positions
  • Long-Term Positioning: Bearish

Communications

  • XLC continues to perform better than the overall market. 
  • We added to this sector previously as the 200-dma retracement level was taken out. However, it is extremely overbought and we took some profits previously. 
  • We continue to like the more defensive quality of the sector, so we continue to look for a pullback to add back to our holdings.
  • Our have set an alert at $51 to revisit adding to our holdings.
    • Short-Term Positioning: Bullish
    • Last Week: Hold positions
    • This Week: Hold positions
  • Long-Term Positioning: Neutral

Energy

  • Energy stocks are getting very overbought short-term and a pullback is likely over the next month or so. 
  • We added to our holdings previously by increasing exposure in XOM and CVX in the equity model and adding those two positions to the ETF model. 
  • We have a stop-loss alert set at $32.50, with a high-alert set at $42.5. The sector is about at the same level as last week, so no action taken. 
  • Short-Term Positioning: Neutral
    • Last week: Hold positions
    • This week: Hold positions
    • Stop loss adjusted to $32.50.
  • Long-Term Positioning: Bearish

Financials

  • Financials have lagged the bear market rally badly, and continue to underperform. 
  • Previously we sold out of financials and will re-evaluate once the market calms down and finds a bottom. That may be occurring now but we will continue to evaluate carefully.
  • We continue to suggest selling rallies in financials.
  • We have an alert set at $21 to start evaluating holdings.
  • Short-Term Positioning: Neutral
    • Last week: No position
    • This week: No position
  • Long-Term Positioning: Bearish

Industrials

  • XLI had a good rally last week and finally broke out of its consolidation. XLI is lagging the market overall, and still trades well below other sectors of the market.
  • We sold all of our holdings previously and will opt to wait for a better market structure to move back into the sector. 
  • We have moved our alert to $62 to evaluate positions
  • Short-Term Positioning: Bearish
    • Last week: No position.
    • This week: No position.
  • Long-Term Positioning: Bearish

Technology

  • Technology continues push higher and we continue to hold our exposure to the sector.
  • The rally is starting to fade here a bit as the sector runs into the bottom of the uptrend line from the July 2017 lows. 
  • If we get a pullback that holds support at the 200-dma, we will look add more weight to the sector.
  • We have moved our alert to $87.5.
  • Short-Term Positioning: Bullish
    • Last week: Hold positions
    • This week: Hold positions.
    • Long-Term Positioning: Bullish

Staples

  • After adding to XLP recently, it started a move higher towards the 200-dma.
  • XLP is not overbought after working off the previous extension, so there is “fuel” for a further rally if it can break above resistance.
  • We are moving our stop-loss alert to $55 as our stop-level.
  • Short-Term Positioning: Bullish
    • Last week: Hold positions
    • This week: Hold positions
    • Long-Term Positioning: Bullish

Real Estate

  • XLRE held support at the 38.2% retracement and rallied. We also added some exposure to our holdings previously.
  • The sector is just starting to move back into overbought territory and remains oversold relative to the overall market. 
  • We have a low limit alert at $31 as our stop-loss level.
  • Short-Term Positioning: Neutral
    • Last week: Hold positions
    • This week: Hold positions.
    • Long-Term Positioning: Bullish

Utilities

  • XLU also held support at the 38.2% retracement level and turned up. We added some exposure previously to the sector as we look for a rotation into more defensive names. 
  • There should be a relative “risk off” safety trade with XLU if we see a pullback in the broader market.
  • We have an alert set at $54.
  • Short-Term Positioning: Bullish
    • Last week: Added slightly
    • This week: Hold positions
  • Long-Term Positioning: Bullish

Health Care

  • XLV finally ran into resistance near all-time highs and has been consolidating. Late last week, it broke out of that consolidation near all-time highs.
  • The 200-dma is now important support and needs to hold, along with the previous tops going back to 2018. 
  • The sector is very overbought short-term.
  • We have an alert set at $95 to add more to our holdings.
  • Short-Term Positioning: Bullish
    • Last week: Hold positions
    • This week: Hold positions.
  • Long-Term Positioning: Bullish

Discretionary

  • Discretionary performance has improved much over the past couple of weeks. The sector is still at a lot of risk from earnings, but momentum is carrying the sector higher for now. 
  • Last week, XLY rallied to the 200-dma and finally broke above it, and is now struggling with the uptrend from 2018.
  • The sector is VERY overbought, so a pullback is likely. So, use pullbacks to add exposure between 117.50 and 120.00.
  • Short-Term Positioning: Bullish
    • Last week: No position
    • This week: No position
  • Long-Term Positioning: Neutral

Transportation

  • The sector finally mustered a breakout rally from the 38.2% retracement level it struggled with over the last couple of months. 
  • The sector performance has improved but still lags the broader market. 
  • There is a trading opportunity for transports, but the sector is very overbought and extended. Look for a pullback to $49-50 for a trading entry. 
  • We are moving our trading alert level to $49, but we aren’t excited about it.
  • Short-Term Positioning: Neutral
    • Last week: No position
    • This week: No position
  • Long-Term Positioning: Bearish

Why We Increased Our Equity Exposure

Yesterday afternoon we added a 5% position of the S&P 500 (SPY) to both our sector and equity models. The trade follows our strategy of increasing equity exposure as the S&P 500 surpasses critical technical levels.

On Tuesday, the S&P 500 broke above its 200-day moving average. After falling back and testing the average Wednesday morning, it bounced and surged higher.  The positive technical signal of breaking the 200-day moving average and then holding the average, convinced us to increase our equity exposure. We have a tight stop loss on this position at 2965 in case this proves to be a false breakout.

We are very suspicious of recent market gains given the economic devastation and many unknowns related to the virus. We are treating this as a rental position. If the market continues to rally, we may add to our equity exposure and possibly replace the rental with stock and sector positions. If the market falters, we will adhere to our risk limits and reduce our exposure.   

Sector Buy/Sell Review: 05-26-20

Each week we produce a “Sector Buy/Sell Review” chart book of the S&P 500 sectors to review where money is flowing within the market as whole. This helps refine not only decision making about what to own and when, but what sectors to overweight or underweight to achieve better performance.

HOW TO READ THE SECTOR BUY/SELL REVIEW CHARTS

There are three primary components to each chart:

  • The price chart is in orange
  • Over Bought/Over Sold indicator is in gray in the background.
  • The Buy / Sell indicator is in blue.

When the gray indicator is at the TOP of the chart, there is typically more risk and less reward available at the current time. In other words, the best time to BUY is when the short-term condition is over-sold. Likewise when the buy/sell indicator is above the ZERO line investments have a tendency of working better than when below the zero line.

NEW PORTFOLIO TOOL:  Under the PORTFOLIO tab you will see a new tool called ALERTS. When you click on the link, any position that you in a WATCHLIST or PORTFOLIO will show up in the ALERTS window.  You can add SELL TARGETS, STOP LOSS, and Daily % Changes. When those levels are triggered, you will be sent an email and the alerts will show on your dashboard. 

We are using this system for all our current positions and will be reporting our targets in these daily updates.

Basic Materials

  • XLB reclaimed the 61.8% retracement last week, but remains overbought, and is underperforming the market. 
  • If we do enter a trade, parameters will be very tight as the outlook for earnings remains poor.
  • We raising our trading alert to $49 which may set up a tradeable opportunity.
  • Short-Term Positioning: Bearish
    • Last Week: No Positions
    • This Week: No Positions
  • Long-Term Positioning: Bearish

Communications

  • XLC continues to perform better than the overall market. 
  • We added to this sector previously as the 200-dma retracement level was taken out. However, it is extremely overbought and we took some profits on Friday. 
  • We continue to like the more defensive quality of the sector, so we are looking for a pullback to add back to our holdings.
  • Our have set an alert at $51 to revisit adding to our holdings.
    • Short-Term Positioning: Bullish
    • Last Week: Hold positions
    • This Week: Took profits, hold balance.
  • Long-Term Positioning: Neutral

Energy

  • Energy stocks have been trading much better than the commodity as relative strength has improved for the sector. 
  • We added to our holdings previously by increasing exposure in XOM and CVX in the equity model and adding those two positions to the ETF model. 
  • We have a stop-loss alert set at $32.50, with a high-alert set at $40. The sector is about at the same level as last week, so no action taken. 
  • Short-Term Positioning: Bearish
    • Last week: Added to holdings
    • This week: Hold positions
    • Stop loss adjusted to $32.50.
  • Long-Term Positioning: Bearish

Financials

  • Financials have lagged the bear market rally badly, and continue to underperform. 
  • Previously we sold out of financials and will re-evaluate once the market calms down and finds a bottom. That may be occurring now but we will continue to evaluate carefully.
  • We continue to suggest selling rallies in financials.
  • We have an alert set at $21 to start evaluating holdings.
  • Short-Term Positioning: Neutral
    • Last week: No position
    • This week: No position
  • Long-Term Positioning: Neutral

Industrials

  • As with XLB, so goes XLI.
  • XLI had a good rally last week but failed to break out of its consolidation. 
  • We sold all of our holdings previously and will opt to wait for a better market structure to move back into the sector. 
  • We have an alert set at $58 to evaluate positions
  • Short-Term Positioning: Bearish
    • Last week: No position.
    • This week: No position.
  • Long-Term Positioning: Bearish

Technology

  • Technology continues to be our strong suit and we added more exposure to the sector last week.
  • The rally continued the push toward all-time highs and is back into positive territory for year. However, it remains a narrow advance. 
  • If we get a pullback that holds support at the 61.8% retracement, or the 200-dma, we will look add more weight to the sector. We moved our alert to $87.5.
  • Short-Term Positioning: Bullish
    • Last week: Added slightly
    • This week: Hold positions.
    • Long-Term Positioning: Bullish

Staples

  • We also added to XLP last week.
  • XLP is working off the overbought condition somewhat, but still has more to go. Importantly, XLP continues to hold support at the 50% retracement.
  • We have an alert set at $55 as our stop-level.
  • Short-Term Positioning: Bullish
    • Last week: Added slightly
    • This week: Hold positions
    • Long-Term Positioning: Bullish

Real Estate

  • XLRE held support at the 38.2% retracement and rallied. We also added some exposure to our holdings.
  • The sector is not overbought and is oversold relative to the market. 
  • We have a low limit alert at $30 if lower support is getting threatened.
  • Short-Term Positioning: Bullish
    • Last week: Added slightly
    • This week: Hold positions.
    • Long-Term Positioning: Bullish

Utilities

  • XLU, like XLRE, held support at the 38.2% retracement level and turned up. We added some exposure last week to the sector as we look for a rotation into more defensive names. 
  • There should be a relative “risk off” safety trade with XLU if we see a pullback in the broader market.
  • We have an alert set at $54.
  • Short-Term Positioning: Bullish
    • Last week: Added slightly
    • This week: Hold positions
  • Long-Term Positioning: Bullish

Health Care

  • XLV finally ran into resistance near all-time highs and has been consolidating.
  • The 200-dma is now important support and needs to hold. 
  • The sector is very overbought short-term.
  • We have an alert set at $95 to add more to our holdings.
  • Short-Term Positioning: Neutral
    • Last week: Added slightly
    • This week: Hold positions.
  • Long-Term Positioning: Bullish

Discretionary

  • Discretionary is performing better now. 
  • Last week, XLY rallied to the 200-dma and finally broke above it. We will see if it can hold this week.
  • AMZN makes up about 70% of the entire ETF, so this is really an AMZN story more than discretionary retail overall. 
  • The sector is VERY overbought, so a pullback is likely, but there is a trading opportunity if XLY can hold this break above the 200-dma.
  • We are focusing on Staples for the time being but have an alert set to add Discretionary as a trading position at $110.00 on a pullback or $118 on a breakout.
  • Short-Term Positioning: Neutral
    • Last week: No position
    • This week: No position
  • Long-Term Positioning: Neutral

Transportation

  • We have remained out of the economically sensitive sector as the impact of the “coronavirus” continues to rip through earnings in this sector. 
  • The sector mustered a weak rally from lows back to the 38.2% retracement level and continues to consolidate below that level last week. We will see if it can get above it this week.
  • We have an alert set for a trading opportunity set at $44, but we aren’t excited about it.
  • Short-Term Positioning: Neutral
    • Last week: No position
    • This week: No position
  • Long-Term Positioning: Bearish

Sector Buy/Sell Review: 05-20-20

Each week we produce a Sector Buy Sell chart book of the S&P 500 sectors to review where money is flowing within the market as whole. This helps refine not only decision making about what to own and when, but what sectors to overweight or underweight to achieve better performance.

HOW TO READ THE SECTOR BUY/SELL REVIEW CHARTS

There are three primary components to each chart:

  • The price chart is in orange
  • The Over Bought/Over Sold indicator is in gray
  • The Buy / Sell indicator is in blue.

When the gray indicator is at the TOP of the chart, there is typically more risk and less reward available at the current time. In other words, the best time to BUY is when the short-term condition is over-sold. Likewise when the buy/sell indicator is above the ZERO line investments have a tendency of working better than when below the zero line.

NEW PORTFOLIO TOOL:  Under the PORTFOLIO tab you will see a new tool called ALERTS. When you click on the link, any position that you in a WATCHLIST or PORTFOLIO will show up in the ALERTS window.  You can add SELL TARGETS, STOP LOSS, and Daily % Changes. When those levels are triggered, you will be sent an email and the alerts will show on your dashboard. 

We are using this system for all our current positions and will be reporting our targets in these daily updates.

Basic Materials

  • XLB reclaimed the 61.8% retracement with Monday’s rally, but remains overbought, and is underperforming the market. 
  • We are out of the sector for now due to the underperformance. However, if we do enter a trade, parameters will be very tight as the outlook for earnings remains dismal 
  • We raising our trading alert to $46 which may set up a tradeable opportunity.
  • Short-Term Positioning: Bearish
    • Last Week: No Positions
    • This Week: No Positions
  • Long-Term Positioning: Bearish

Communications

  • XLC continues to perform better than the overall market. 
  • We added to this sector on Monday as the 200-dma retracement level was taken out. 
  • We continue to like the more defensive quality of the sector, BUT on a short-term basis it is very overbought. We are looking for a pullback to add further to our holdings.
  • Our have set an alert at $49 to revisit adding to our holdings.
    • Short-Term Positioning: Bullish
    • Last Week: Hold positions
    • This Week: Added slighly.
  • Long-Term Positioning: Neutral

Energy

  • Energy stocks have been trading much better than the commodity as relative strength has improved for the sector. 
  • We added to our holdings on Monday by increasing exposure in XOM and CVX in the equity model and adding those two positions to the ETF model. 
  • We have a stop-loss alert set at $30, with a high-alert set at $40. The sector is about at the same level as last week, so no action taken. 
  • Short-Term Positioning: Bearish
    • Last week: Hold positions
    • This week: Added slightly
    • Stop loss is $30.
  • Long-Term Positioning: Bearish

Financials

  • Financials have lagged the bear market rally badly, and continue to underperform. 
  • We sold out of financials previously and will re-evaluate once the market calms down and finds a bottom. 
  • We continue to suggest selling rallies in financials.
  • We have an alert set at $21 to start evaluating holdings.
  • Short-Term Positioning: Neutral
    • Last week: No position
    • This week: No position
  • Long-Term Positioning: Neutral

Industrials

  • As with XLB, so goes XLI.
  • XLI had a good rally on Monday but failed to break out of its consolidation. 
  • We sold all of our holdings previously and will opt to wait for a better market structure to move back into the sector. 
  • We have an alert set at $58 to evaluate positions
  • Short-Term Positioning: Bearish
    • Last week: No position.
    • This week: No position.
  • Long-Term Positioning: Bearish

Technology

  • Technology continues to be our strong suit and we added more exposure to the sector on Monday. 
  • The rally on Monday continues the push toward all-time highs and is back into positive territory for year. However, it is a narrow advance driven by the 5-major constituents. So goes AAPL, so goes the market. 
  • If we get a pullback that holds support at the 200-dma and the 50% retracement level, we will look add more weight to the sector. We have an alert set at $86.
  • Short-Term Positioning: Bullish
    • Last week: Holding positions.
    • This week: Added slightly
    • Long-Term Positioning: Bullish

Staples

  • We also added to XLP this week a smidge. 
  • XLP is working off the overbought condition somewhat, but still has more to go. Importantly, XLP continues to hold support at the 50% retracement.
  • We have an alert set at $55 as our stop-level.
  • Short-Term Positioning: Bullish
    • Last week: Hold positions
    • This week: Added slightly
    • Long-Term Positioning: Bullish

Real Estate

  • XLRE held support at the 38.2% retracement and rallied. We added some exposure to our holding on Monday. 
  • The sector is not overbought and is oversold relative to the market. 
  • We have a low limit alert at $30 if lower support is getting threatened.
  • Short-Term Positioning: Bullish
    • Last week: No position
    • This week: Added slightly
    • Long-Term Positioning: Bullish

Utilities

  • XLU, like XLRE, held support at the 38.2% retracement level and turned up. We added some exposure to the sector as we look for a rotation into more defensive names. 
  • We should see a relative “risk off” safety trade with XLU if we see a pullback in the broader market.
  • We have an alert set at $54.
  • Short-Term Positioning: Bullish
    • Last week: Hold position.
    • This week: Added slightly
  • Long-Term Positioning: Bullish

Health Care

  • XLV finally ran into resistance near all-time highs and has been consolidating.
  • The 200-dma is now important support and needs to hold. 
  • The sector is very overbought short-term.
  • We have an alert set at $95 to add more to our holdings.
  • Short-Term Positioning: Neutral
    • Last week: Hold positions
    • This week: Added slightly
  • Long-Term Positioning: Bullish

Discretionary

  • Discretionary is performing better now. 
  • XLY rallied to the 200-dma and finally broke above it. 
  • AMZN makes up about 70% of the entire ETF, so this is really an AMZN story more than discretionary retail overall. 
  • The sector is VERY overbought, so a pullback is likely, but there is a trading opportunity if XLY can hold this break above the 200-dma.
  • We are focusing on Staples for the time being but have an alert set to add Discretionary as a trading position at $110.00 on a pullback or $118 on a breakout.
  • Short-Term Positioning: Neutral
    • Last week: No position
    • This week: No position
  • Long-Term Positioning: Neutral

Transportation

   

  • We have remained out of the economically sensitive sector as the impact of the “coronavirus” continues to rip through earnings in this sector. 
  • The sector mustered a weak rally from lows back to the 38.2% retracement level, got very overbought, and has now failed at resistance. 
  • We have an alert set for a trading opportunity set at $44, but we aren’t excited about it.
  • Short-Term Positioning: Neutral
    • Last week: No position
    • This week: No position
  • Long-Term Positioning: Bearish

Selected Portfolio Positions Review: 05-13-20

Each week we produce a chart book of 10-selected portfolio positions to review in our equity model. Specifically, we are looking at positions which warrant attention, or are providing an opportunity to buy or sell.

While the portfolios are designed to have longer-term holding periods, we understand that things do not always go the way we plan. This monitoring process keeps us focused on capital preservation and long-term returns.

HOW TO READ THE CHARTS

There are three primary components to each chart:

  • The ORANGE price chart is overlaid on the short-term “Over Bought / Over Sold” indicator which is in GREY. 
  • The Support/Resistance line (green) is the longer-term moving average which also acts as a trailing stop in many cases.
  • The Buy / Sell is triggered (Lower Panel) when the BLUE histogram is above (BUY) or below (SELL) the zero line.

When the price of a position is overbought, and on a buy signal, it is generally a good time to take profits. When that positioning is reversed it is often a good time to add to a winning position, or look for an opportunity to add to holdings which have not violated trailing stops.

With this basic tutorial, we will now review some positions in our Equity Portfolio which are either a concern, an opportunity, a recent change, or are doing something interesting.

WMT – WalMart (Add)

  • We added WMT on Monday to the portfolio taking advantage of the recent pullback to previous support. 
  • Channel checks look good as people are shopping WMT and COST consistently so earnings should be stable going forward. 
  • Stop loss is set at $117.50

COST – CostCo Wholesale (Added)

  • As we added WMT to our portfolio, we added to our current position of COST for the same reasons.
  • Earnings should be stable as shopping continues (with or without restrictions)
  • Trend is very positive and is not overbought. Sideways consolidation since the beginning the year has removed much of the risk of ownership.
  • Stop has been raised to $290

INTC – Intel (Looking To Add)

  • We are looking to add INTC to the portfolio and just waiting for the right setup as we are underweight technology in the Equity portfolio.
  • We would like to see a pullback to the 200-dma that holds, or a consolidation that works off the overbought condition.
  • Be patient and wait for the right entry point. 
  • Stop will be set at $55

CAG – Conagra Foods (Sold)

  • We previously added to CAG  and it broke above the 200-dma and gained some traction. 
  • We sold CAG to take profits in the position and make room in the portfolio for increasing some of our other holdings. (We explained this in the portfolio commentary previously.)
  • There is nothing wrong with CAG technically or fundamentally. This was an allocation decision for our portfolio structure.
  • Stop is moved up to $30 if you are still long.

MPW – Medical Properties REIT (Add)

  • REITs have gotten oversold and out of favor relative to the Technology heavy sector. There will be a rotation to REITs eventually, so we are placing some early, small, bets.
  • We added MPW which, like our other REIT holding CHCT, is in the Healthcare space (which we like due to demographics) and provides us a decent yield.
  • MPW is not overbought and we will look to add to our holdings on a pullback to support that holds.
  • Stop loss is set at $14

GDX – Gold Miners (Reduced)

  • We took profits out of GDX and reduce our holding back to 1.5% of the portfolio.
  • GDX is grossly extended so we are looking for a pullback to support about $32 to add to our postiion.
  • We have traded gold miners a couple of times, and we have been building a position since March in the miners due to valuations relative to the price of gold. 
  • Stop is moved up to $29.00

CLX – Clorox Co. (Looking To Take Profits)

  • CLX has been a bit of a runaway train since adding the holding. 
  • We are going to take profits and reduce our position size temporarily to await a pullback to support and reduce some of the extreme overbought condition.
  • Stop is moved up to $180

NSC – Norfolk Southern (Looking For Entry)

  • We have owned NSC previously and took profits several times before closing out the position due to the shutdown of the economy.
  • With the economy starting to reopen we are seeing rail traffic starting to recover.
  • NSC is extremely overbought so we are looking for a bit of a correction to add a position back to our portfolios. 
  • As with INTC, we are not in a rush and will just wait for the right opportunity.
  • Stop loss will be set at $150

CMCSA – Comcast Corp. (Watch)

  • CMCSA is underperforming the market as a whole and performance has been disappointing as of late.
  • After taking profits previously, we are at a reduced weighting in the portfolio.
  • We are watching the position for now and evaluating it, however, if it doesn’t start to pick up performance soon, we will likely remove it and replace it with another candidate.
  • Current stop remains at $34

CHCT – CHCT Healthcare REIT (Looking To Buy)

  • CHCT was beat up badly during the liquidation in the credit markets. We still maintain a position in CHCT and are now looking to add to the holding. 
  • It got hit on Tuesday as Los Angeles announced they will remain closed for the rest of the summer. This will impact the rents of commercial REITs, but so goes the sector, so goes the holdings of all REITs.
  • We will use this opportunity to add to our holdings, but we will look for a bottom.
  • Buy at $31-32
  • Stop loss adjusted to $28

Sector Buy/Sell Review: 05-12-20

Each week we produce a Sector Buy Sell chart book of the S&P 500 sectors to review where money is flowing within the market as whole. This helps refine not only decision making about what to own and when, but what sectors to overweight or underweight to achieve better performance.

HOW TO READ THE SECTOR BUY/SELL REVIEW CHARTS

There are three primary components to each chart:

  • The price chart is in orange
  • The Over Bought/Over Sold indicator is in gray
  • The Buy / Sell indicator is in blue.

When the gray indicator is at the TOP of the chart, there is typically more risk and less reward available at the current time. In other words, the best time to BUY is when the short-term condition is over-sold. Likewise when the buy/sell indicator is above the ZERO line investments have a tendency of working better than when below the zero line.

NEW PORTFOLIO TOOL:  Under the PORTFOLIO tab you will see a new tool called ALERTS. When you click on the link, any position that you in a WATCHLIST or PORTFOLIO will show up in the ALERTS window.  You can add SELL TARGETS, STOP LOSS, and Daily % Changes. When those levels are triggered, you will be sent an email and the alerts will show on your dashboard. 

We are using this system for all our current positions and will be reporting our targets in these daily updates.

Basic Materials

  •  XLB failed at the 61.8% retracement rally last week, is overbought, and is underperforming the market. It failed again at the 61.8% retracement level on Monday.
  • We are out of the sector for now due to the underperformance. However, if we do enter a trade, parameters will be very tight as the outlook for earnings remains dismal 
  • We have lowered our trading alert to $46 which may set up a tradeable opportunity.
  • Short-Term Positioning: Bearish
    • Last Week: No Positions
    • This Week: No Positions
  • Long-Term Positioning: Bearish

Communications

  • XLC continues to perform better than the overall market. 
  • We added to this sector previously, and the 200-dma retracement level has been reached. With the break above the 61.8% retracement level we added again to the sector on Monday.
  • We continue to like the more defensive quality of the sector, BUT on a short-term basis it is very overbought. We are looking for a pullback to add further to our holdings.
  • Our have set an alert at $49 to revisit adding to our holdings.
    • Short-Term Positioning: Bullish
    • Last Week: Hold positions
    • This Week: Hold positions
  • Long-Term Positioning: Neutral

Energy

  • Energy stocks have been trading much better than the commodity as relative strength has improved for the sector. 
  • We added a holding of XLE to our sector model (XOM, CVX to the equity model) to trade this current rally. We are looking for an opportunity to add to our holdings. 
  • We have a stop-loss alert set at $30, with a high-alert set at $40. The sector is about at the same level as last week, so no action taken. 
  • Short-Term Positioning: Bearish
    • Last week: Hold positions
    • This week: Hold positions
    • Stop loss is $30.
  • Long-Term Positioning: Bearish

Financials

  • Financials have lagged the bear market rally badly, and continue to underperform. 
  • We sold out of financials previously and will re-evaluate once the market calms down and finds a bottom. 
  • We continue to suggest selling rallies in financials.
  • We have an alert set at $21 to start evaluating holdings.
  • Short-Term Positioning: Neutral
    • Last week: No position
    • This week: No position
  • Long-Term Positioning: Neutral

Industrials

  • As with XLB, so goes XLI.
  • XLI had a good rally and is again retesting the 38.2% retracement level.
  • We sold all of our holdings previously and will opt to wait for a better market structure to move back into the sector. 
  • We have an alert set at $58 to evaluate positions
  • Short-Term Positioning: Bearish
    • Last week: No position.
    • This week: No position.
  • Long-Term Positioning: Bearish

Technology

  • Technology continues to be the best looking sector chart available. We are at full weight in the sector now but will look to overweight on a pullback to support.
  • The rally on Monday continues push toward all-time highs and is back into positive territory for year. However, it is a narrow advance driven by the 5-major constituents. So goes AAPL, so goes the market. 
  • If we get a pullback that holds support at the 200-dma and the 50% retracement level, we will look add more weight to the sector. We have an alert set at $86.
  • Short-Term Positioning: Bullish
    • Last week: Holding positions.
    • This week: Holding positions.
    • Long-Term Positioning: Bullish

Staples

  • XLP recently pulled back and held support at the 50% retracement level. We increased our exposure slightly to the sector on this test. 
  • XLP is working off the overbought condition somewhat, but still has more to go.
  • We have an alert set at $55 as our stop-level.
  • Short-Term Positioning: Bullish
    • Last week: Hold positions
    • This week: Holding positions
    • Long-Term Positioning: Bullish

Real Estate

  • XLRE has recently rallied back to the 61.8% retracement level, and failed support at the 50% retracement last week. 
  • The sector is not overbought and is oversold relative to the market. If XLRE holds the $32 level, we should see some better performance here soon on a “safety rotation” trade with “bonds.” 
  • We have a low limit alert at $32 if lower support is getting threatened.
  • Short-Term Positioning: Bullish
    • Last week: No position
    • This week: Be patient.
  • Long-Term Positioning: Bullish

Utilities

  • XLU ran into the 61.8% retracement level, failed, and has now broken the 50% retracement support level. 
  • If XLU is working to hold support at the 32.8% retracement. If it can hold that support and work off the overbought condition, we will likely add to our holdings. 
  • We should see a relative “risk off” safety trade with XLRE if we see a pullback in the broader market.
  • We have an alert set at $54.
  • Short-Term Positioning: Bullish
    • Last week: Hold position.
    • This week: Hold position
  • Long-Term Positioning: Bullish

Health Care

  • XLV finally ran into resistance near all-time highs. The 200-dma is now important support and needs to hold. 
  • Look for a short-term pullback that holds the 62.8% retracement level and the 200-dma and consolidates a bit here before adding weight. The sector is very overbought short-term.
  • We have an alert set at $95 to add to our holdings.
  • Short-Term Positioning: Neutral
    • Last week: Hold positions
    • This week: Look to add
  • Long-Term Positioning: Bullish

Discretionary

  • Discretionary is performing better now. 
  • XLY rallied to the 200-dma and failed, but is again retesting that level of resistance on Monday. 
  • The sector is VERY overbought, so a pullback is likely, but there is a trading opportunity to if XLY can break above the 200-dma.
  • We are focusing on Staples for the time being but have an alert set to add Discretionary as a trading position at $110.00 on a pullback or $118 on a breakout.
  • Short-Term Positioning: Neutral
    • Last week: No position
    • This week: No position
  • Long-Term Positioning: Neutral

Transportation

  • We have remained out of the economically sensitive sector as the impact of the “coronavirus” continues to rip through earnings in this sector. 
  • The sector mustered a weak rally from lows back to the 38.2% retracement level, got very overbought, and has now failed at resistance. 
  • We have an alert set for a trading opportunity set at $44, but we aren’t excited about it.
  • Short-Term Positioning: Neutral
    • Last week: No position
    • This week: No position
  • Long-Term Positioning: Bearish

Selected Portfolio Positions Review: 05-06-20

Each week we produce a chart book of 10-selected portfolio positions to review in our equity model. Specifically, we are looking at positions which warrant attention, or are providing an opportunity to buy or sell.

While the portfolios are designed to have longer-term holding periods, we understand that things do not always go the way we plan. This monitoring process keeps us focused on capital preservation and long-term returns.

HOW TO READ THE CHARTS

There are four primary components to each chart:

  • The price chart is contained within the shaded area which represents 2-standard deviations above and below the short-term moving average.  
  • The Over Bought/Over Sold indicator is in orange at the top.
  • The Support/Resistance line (green) is the longer-term moving average which also acts as a trailing stop in many cases.
  • The Buy / Sell is triggered when the green line is above the red line (Buy) or vice-versa (Sell).

When the price of a position is at the top of the deviation range, overbought and on a buy signal it is generally a good time to take profits. When that positioning is reversed it is often a good time to look to add to a winning position or looking for an opportunity to exit a losing position.

With this basic tutorial, we will now review some positions in our Equity Portfolio which are either a concern, an opportunity, a recent change, or are doing something interesting.

AAPL – Apple, Inc. (Added)

  • We have owned AAPL since early 2019 and reduced our allocations previously taking profits along the way.
  • Going into the earnings report we added to our position which has worked well and Apple has risen with the market as it is one of the major drivers of the overall market advance.
  • Apple is back to very overbought, so we will look for corrections back to the rising trendline or the 200-dma (preferrable) to add to our holdings.
  • Stop loss is set at $225

AMZN – Amazon, Inc.

  • We still like AMZN and are looking to increase our holdings to 3% of the portfolio. However, it is very overbought and needs a bit of correction for a better entry. 
  • We suspect we will get that opportunity this summer, so we will be patient for now and wait for the right setup. 
  • Our cost basis is close to $1800 so we are raising our stop.
  • Stop has been raised to $1900

V – Visa (Looking To Add)

  • We sold V previously, after taking profits in the position a couple of times over concerns about potential defaults in its business.
  • While we are still concerned about that issue, the reopening of the economy should see a burst of spending as consumers go back to spending money they don’t have. 
  • V is very overbought so we are looking for a pullback to add a 1/3rd of our total position which we will then add to opportunistically as our thesis plays out. 
  • Stop is set at $135

CAG – Conagra Foods (Looking To Add)

  • We previously added to CAG  and it broke above the 200-dma and gained some traction. 
  • CAG is a bit overbought short-term so a pullback towards the 200-dma would be an opportunity to add to our existing position. 
  • Importantly, CAG has triggered a “buy signal” which improves our confidence in the position longer-term. 
  • Stop is moved up to $29

MRK – Merck & Co., Inc. (Sold)

  • As with our other healthcare related holdings, MRK held important support so we added a position to portfolios.
  • MRK is ran into the 200-dma, and failed that test, and is overbought short-term, we sold our position in its entirety to make room in our portfolio. 
  • We are reducing the overall number of equity holdings in the portfolio to 20 so that we can concentrate our holdings for better growth.
  • We are overweight healthcare so this sell was simply a realignment of portfolio allocation. 

GDX – Gold Miners (Added)

  • There is very little doubt that what the Fed is doing will ultimately be “inflationary” down the road. 
  • We have traded gold miners a couple of times, and we have been building a position since March in the miners due to valuations relative to the price of gold. 
  • We currently carry about 1/3rd of our total position and will continue to add on pullbacks to support.
  • GDX is very overbought but on a buy signal, so we are looking for a pullback to $32 to add to our holdings. 
  • Stop is moved up to $27.00

CLX – Clorox Co.

  • CLX has performed exceedingly well as people are sanitizing everything.
  • Our thesis was correct that earnings would be strong, and we think that will continue to be the case as the economy reopens. 
  • We are looking to add on pullbacks that work off some of the extreme overbought conditions and extended buy signal. We will be patient for now, but are moving our stops up.
  • Stop is moved up to $160

PEP – Pepsico, Inc. (Sold)

  • As with Merck (MRK), we sold Pepsico (PEP) to make room in our portfolio to increase weightings and reduce the number of holdings.
  • We have a concentration in staples, so we had to pick a stock we like and let it go. Unfortunately, PEP drew the short straw for now. 
  • We still like the company, and it could well rejoin the fold in the future. For us, this is just about portfolio management and nothing directly related to the company.
  • Keep your stop at $127.50

CVS – CVS Health Co. (Sold)

  • Like PEP, we are very overweight healthcare and needed to find another candidate to reduce our holdings. CVS came up short in our holdings in terms of performance, so we let it go for now. 
  • Like PEP, we like the story, the fundamentals and the long-term outlook and prospects, but needed to make room. 
  • Current stop if you are holdings remains at $52

CHCT – CHCT Healthcare REIT (Looking To Buy)

  • CHCT was beat up badly during the liquidation in the credit markets. We still maintain a position in CHCT and are now looking to add to the holding. 
  • It is not overbought as of yet, but is definitely improving. The recent breakout of the consolidation pattern is very encouraging. We are looking for a retest of $34 that holds to add.
  • Buy at $34
  • Stop loss moved up to $30

Sector Buy/Sell Review: 05-05-20

Each week we produce a Sector Buy Sell chart book of the S&P 500 sectors to review where money is flowing within the market as whole. This helps refine not only decision making about what to own and when, but what sectors to overweight or underweight to achieve better performance.

HOW TO READ THE SECTOR BUY/SELL REVIEW CHARTS

There are three primary components to each chart:

  • The price chart is in orange
  • The Over Bought/Over Sold indicator is in gray
  • The Buy / Sell indicator is in blue.

When the gray indicator is at the TOP of the chart, there is typically more risk and less reward available at the current time. In other words, the best time to BUY is when the short-term condition is over-sold. Likewise when the buy/sell indicator is above the ZERO line investments have a tendency of working better than when below the zero line.

NEW PORTFOLIO TOOL:  Under the PORTFOLIO tab you will see a new tool called ALERTS. When you click on the link, any position that you in a WATCHLIST or PORTFOLIO will show up in the ALERTS window.  You can add SELL TARGETS, STOP LOSS, and Daily % Changes. When those levels are triggered, you will be sent an email and the alerts will show on your dashboard. 

We are using this system for all our current positions and will be reporting our targets in these daily updates.

Basic Materials

  •  XLB failed at the 61.8% retracement rally, is overbought, and is underperforming the market.
  • If we do enter a trade, parameters will be very tight as the outlook for earnings remains dismal 
  • We have lowered our trading alert to $46 which may set up a tradeable opportunity.
  • Short-Term Positioning: Bearish
    • Last Week: No Positions
    • This Week: No Positions
  • Long-Term Positioning: Bearish

Communications

  • XLC continues to perform better than the overall market. 
  • We added to this sector previously, and the 200-dma retracement level has been reached. 
  • We continue to like the more defensive quality of the sector, BUT on a short-term basis it is very overbought. Look for a pullback to add to holdings.
  • Our have set an alert at $47 to revisit adding to our holdings.
    • Short-Term Positioning: Bullish
    • Last Week: Hold positions
    • This Week: Hold positions
  • Long-Term Positioning: Neutral

Energy

  • Energy stocks have been trading much better than the commodity as relative strength has improved for the sector. 
  • We added a holding of XLE to our sector model (XOM, CVX to the equity model) to trade this current rally. We are looking for an opportunity to add to our holdings. 
  • We have a stop-loss alert set at $30, with a high-alert set at $40
  • Short-Term Positioning: Bearish
    • Last week: Hold positions
    • This week: Hold positions
    • Stop loss is $30.
  • Long-Term Positioning: Bearish

Financials

  • Financials have lagged the bear market rally badly. You can’t have a bull market without Financials participating. 
  • We sold out of financials previously and will re-evaluate once the market calms down and finds a bottom. 
  • Sell this rally. We have an alert set at $21 to start evaluating holdings.
  • Short-Term Positioning: Neutral
    • Last week: No position
    • This week: No position
  • Long-Term Positioning: Neutral

Industrials

  • As with XLB, so goes XLI.
  • XLI had a good rally and is again retesting the 50% retracement but failed.
  • It has now failed support at the 32.8% retracement as well. 
  • We sold all of our holdings previously and will opt to wait for a better market structure to move back into the sector. 
  • We have an alert set at $58 to evaluate positions
  • Short-Term Positioning: Bearish
    • Last week: No position.
    • This week: No position.
  • Long-Term Positioning: Bearish

Technology

  • We recently added to our Technology holdings which technically is the best looking sector chart available.
  • The rally on Monday continues to wrestle with resistance at the 61.8% retracement level and that is resistance is holding for now. (Markets are trying to chase other sectors which is symbolic of a late stage advance.)
  • If we get a pullback that holds support at the 200-dma and the 50% retracement level, we will look add more weight to the sector. We have an alert set at $86.
  • Short-Term Positioning: Bullish
    • Last week: Holding positions.
    • This week: Holding positions.
    • Long-Term Positioning: Bullish

Staples

  • XLP cleared the 61.8% retracement level and ran into failed resistance at the 200-dma.
  • The break below the 61.8% retracement level is part of a pullback we have been expecting.  Support needs to hold at the 50% retracement level. 
  • We will look to add to our holdings if support holds. 
  • We have our alert set at $57
  • Short-Term Positioning: Bullish
    • Last week: Hold positions
    • This week: Holding positions
    • Long-Term Positioning: Bullish

Real Estate

  • XLRE has recently rallied back to the 61.8% retracement level, and failed support at the 50% retracement last week. 
  • That level needs to hold this week. The sector is not overbought and is oversold relative to the market.
  • We have a low limit alert at $32 if lower support is getting threatened.
  • Short-Term Positioning: Bullish
    • Last week: No position
    • This week: Be patient.
  • Long-Term Positioning: Bullish

Utilities

  • XLU ran into the 61.8% retracement level, failed, and has now broken the 50% retracement support level. 
  • If XLU can hold support at the 32.8% retracement, we can look to increase our previous purchase. 
  • We have an alert set at $54.
  • Short-Term Positioning: Bullish
    • Last week: Hold position.
    • This week: Hold position
  • Long-Term Positioning: Bullish

Health Care

  • XLV finally ran into resistance near all-time highs. The 200-dma is now important support and needs to hold. 
  • Look for a short-term pullback that holds the 62.8% retracement level and the 200-dma and consolidates a bit here before adding weight. The sector is very overbought short-term.
  • We have an alert set at $95 to add to our holdings.
  • Short-Term Positioning: Neutral
    • Last week: Hold positions
    • This week: Look to add
  • Long-Term Positioning: Bullish

Discretionary

  • Discretionary is performing better now. 
  • XLY rallied to the 200-dma and failed at important resistance and is underperforming the broader market. 
  • The sector is VERY overbought, so a pullback is likely, but there is a trading opportunity to if XLY can hold support at the 50% retracement level..
  • We are focusing on Staples for the time being but have an alert set to add Discretionary as a trading position at $110.00
  • Short-Term Positioning: Neutral
    • Last week: No position
    • This week: No position
  • Long-Term Positioning: Neutral

Transportation

  • We have remained out of the economically sensitive sector as the impact of the “coronavirus” continues to rip through earnings in this sector. 
  • The sector mustered a weak rally from lows back to the 38.2% retracement level, got very overbought, and has now failed at resistance. 
  • We have an alert set for a trading opportunity set at $44, but we aren’t excited about it.
  • Short-Term Positioning: Neutral
    • Last week: No position
    • This week: No position
  • Long-Term Positioning: Bearish