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Technical Value Scorecard Report For The Week of 4-15-21

Written by Michael Lebowitz | Apr 15, 2021
Technical 4-15-2021, Technical Value Scorecard Report For The Week of 4-15-21PRINTER FRIENDLY VERSION

The Technical Value Scorecard Report uses 6-technical readings to score and gauge which sectors, factors, indexes, and bond classes are overbought or oversold. We present the data on a relative basis (versus the assets benchmark) and on an absolute stand-alone basis. You can find more detail on the model and the specific tickers below the charts.

Commentary 4-15-21

  • Despite the continuation of the stock rally, the sectors exhibited very little change versus last week. Other than Healthcare, most sectors are hovering around fair value versus the S&P 500. Similar story on the factor/index graph, as the weekly changes are small. Some of the weak relative performance in healthcare is likely due to concerns that Joe Biden will work to amend the Affordable Care Act (ACA) and tackle high prescription drug prices. In general, we can say the market is relatively balanced as almost all sectors and factors/indexes are traveling with the market in a similar fashion.
  • The scatter plot in the bottom right remains poorly correlated. However, it shows that the sectors negatively affected by higher rates and inflation are above the regression line, and the so-called inflationary stocks are below it. The inflation/deflation relative value is slightly oversold, after coming off a long period of being well overbought.
  • Over the last ten days, the top five sectors/factors with the largest excess return vs the S&P 500 are as follows: Momentum, Discretionary, Technology, QQQ, and Utilities. Over the last 35 trading days, the utility sector has been the best performer, followed by discretionary. To reiterate a recent theme, the deflationary/lower rates sectors have been outperforming. More evidence can be seen in the Absolute fixed income graph showing TIP is slightly oversold. TIP was consistently overbought from October through February as implied inflation rates were rising. On a relative basis versus TLT it is now at fair value, again after having been relatively overbought for quite a few months.
  • On an Absolute basis, Utilities are now the most overbought sector. The S&P 500 and every sector is currently decently overbought leading us to believe a consolidation or down trade is likely coming in the next week or two. Our money flow indicators affirm the outlook. The S&P 500 over two standard deviations from its 50-day ma, and nearly 2 standard deviations from its 200-day ma, also warning of a potential consolidation or a pullback. It is important to note, over the last few months overbought conditions, such as today, saw limited pullbacks. This time may be different, but the fiscal and massive stimulus is still running at historically high levels and acting as a tailwind for assets.

Graphs (Click on the graphs to expand)

Technical 4-15-2021, Technical Value Scorecard Report For The Week of 4-15-21
Technical 4-15-2021, Technical Value Scorecard Report For The Week of 4-15-21

Users Guide

The score is a percentage of the maximum/minimum score, as well as on a normalized basis (sigma) for the last 200 trading days. Assets with scores over or under +/-60% and sigmas over or under +/-2 are likely to either consolidate or change trend. When both the score and sigma are above or below those key levels simultaneously, the signal is stronger.

The first set of four graphs below are relative value-based, meaning the technical analysis score and sigma represent a ratio of the asset to its benchmark. The second set of graphs is computed solely on the price of the asset. At times we present “Sector spaghetti graphs” which compare momentum and our score over time to provide further current and historical indications of strength or weakness. The square at the end of each squiggle is the current reading. The top right corner is the most bullish, while the bottom left corner the most bearish.

The technical value scorecard report is one of many tools we use to manage our portfolios. This report may send a strong buy or sell signal, but we may not take any action if other research and models do not affirm it.

The ETFs used in the model are as follows:

  • Staples XLP
  • Utilities XLU
  • Health Care XLV
  • Real Estate XLRE
  • Materials XLB
  • Industrials XLI
  • Communications XLC
  • Banking XLF
  • Transportation XTN
  • Energy XLE
  • Discretionary XLY
  • S&P 500 SPY
  • Value IVE
  • Growth IVW
  • Small Cap SLY
  • Mid Cap MDY
  • Momentum MTUM
  • Equal Weighted S&P 500 RSP
  • NASDAQ QQQ
  • Dow Jones DIA
  • Emerg. Markets EEM
  • Foreign Markets EFA
  • IG Corp Bonds LQD
  • High Yield Bonds HYG
  • Long Tsy Bonds TLT
  • Med Term Tsy IEI
  • Mortgages MBB
  • Inflation TIP
  • Inflation Index- XLB, XLE, XLF, and Value (IVE)
  • Deflation Index- XLP, XLU, XLK, and Growth (IWE)

Talk with an Advisor & Planner Today!

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Michael Lebowitz, CFA is an Investment Analyst and Portfolio Manager for RIA Advisors. specializing in macroeconomic research, valuations, asset allocation, and risk management. RIA Contributing Editor and Research Director. CFA is an Investment Analyst and Portfolio Manager; Co-founder of 720 Global Research. 

Follow Michael on Twitter or go to 720global.com for more research and analysis.
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