Today’s stock market update include several investing themes that I am monitoring right now.
September is an interesting month historically, and with the recent run-up, it could be an important one.
Here are some broader themes I am watching now:
1) Technology has regained leadership with broad-based movement back to new highs, and Growth dominating, but bifurcation is growing larger.
2) Treasury bond yields have pushed to new weekly highs which should aid Financials.
3) Investor sentiment is starting to grow extreme, with Put/call levels back under .50 and 13-week moving average of CBOE Equity Put/call the lowest in 13 years.
4) Market breadth has tailed off “big-time” with more than 5 occurrences in the last few weeks of more Declining than Advancing issues.
5) Cyclical time of importance starts in September, leading indices lower while implied volatility spikes- 20, 30 and 60 year cycle show above-avg weakness.
Biggest news Wednesday centered on the push back into Defensives, as both Utilities (XLU) and Consumer Staples (XLP) made outsized moves to join the Healthcare Sector (XLV) in outperforming. While Large-cap Technology (QQQ) lagged the move in other sectors, we did see Equal-weighted Tech make a very sharp advance, suggesting it still should be premature to fade Tech just yet.
As charts below show, however, the RHS, Invesco’s Equal-weighted Staples ETF pushed back to new all-time highs, confirming the move we saw in XLP two months ago, not dissimilar from what RYT did recently as Equal-weighted Tech joined XLK. This served to help the market rally “attempt” to broaden out a bit, though breadth remains largely under pressure, and Wednesday’s “flat” reading certainly didn’t help, and A/D lines, particularly on the NASDAQ, remain far below June peaks, not dissimilar from the negative divergence we saw back in February compared to January.
For now, given the lack of price reversals and/or weakness, yet again, it’s premature to make much of this as prices are moving higher, markets haven’t reversed course, Demark’s counter-trend exhaustion was postponed (looks to be 1-2 weeks away) and it pays to stick with the trend. Yet, shifting ever so slightly into more defensive themes makes a world of sense, with Healthcare just pushing back to new highs (as discussed yesterday) and now stocks like PEP, and KO have come back “from the dead” all at once yesterday, surging up above prior 5 month consolidation bases. This is important, and definitely bears watching as this defensive theme was largely absent in recent months. While it’s just one day, we saw huge relative movement to new weekly highs in Utilities and Staples along with Healthcare that makes these groups attractive. Late to the party? Perhaps, but worth following and overweighting near-term.
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Twitter: @MarkNewtonCMT
Author has positions in mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
