Greetings. Remains a tale of two cities in this market and it is imperative you pay attention as bull and bear sit side by side.
To be repetitive:
We would continue to avoid new commitments to:
Energy, oil&gas, most commodity names, big retail, many REITs, Transports, small cap vs big cap, big telcom, drug stores, most biotech, almost everything auto-related. AND FINANCIALS.
WE HIGHLIGHT FINANCIALS BECAUSE OF THEIR POTENTIAL BELLWEATHER STATUS. Currently, they continue to trace out bearish action from the highs. A break and then no ability to rally and again, they are on the verge of a second break. You may scan a bunch of names but just look at the KRE, KBE, XLF. Watch these levels: KBE $40.55…KRE $51.17…XLF $22.89. A break below could be meaningful in a narrowing market.
And a note on energy: January 30 is the date we started saying to avoid. We never know outcome when we think something has topped but notice how we have said to avoid ever since and now down 20%. Classic bearish action as it rides down the DECLINING 50 day average.
On the other end, we can add utilities to the positive end as the XLU broke above the yearly range.After that, the story remains big cap tech/internet/semiconductors and “glamour” names. They are still getting money flows like we have not seen in a long time. Again, must be watched as narrow markets usually do not end well. The end comes when the strongest areas get all the money flows until the music stops. So far, we have seen no evidence that it is at hand so enjoy. Other strong areas are cruise lines, fiberoptics, China ADRs (though looks like they are starting to pull back), hotels, a few airlines and housing.