As the stock market continues to trade at 15-month highs, Sabrient’s SectorCast-ETF model is getting even more defensive, even though we are in a historically bullish time of year. The fundamentals-based quantitative model has a GARP (growth at reasonable price) focus, and this week there are significant changes to the sector rankings.
The emergence of InfoTech earlier in the month was indeed a bullish sign, but the latest rankings might be indicating that a flight to quality is imminent. Read more…
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There are five bullish signs coming out of corporate suites that indicate we’re headed out of the recession and into a sustained recovery, according to Samuel Fromartz of Fidelity. The signs include insider buying, and Mr. Fromartz points to the Claymore/Sabrient Insider ETF (NFO) as evidence, mentioning that NFO has risen 105% since the market low in March. Read the entire article here.
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Just a quick update while I’m on vacation this week.
Latest rankings: There is a slightly more defensive posture to the SectorCast-ETF rankings this week. Healthcare (XLV) still sports the best valuation with dominating score of 87. But second place is now taken by Utilities (XLU) at 75. Consumer Staples (XLP) is in third at 71, followed by Information Technology (IYW) with a score of 67. The rise of Utilities comes in the wake of a strong run by IYW over the past week — perhaps indicating that InfoTech is getting a bit ahead of itself from a fundamental valuation standpoint. Read more…
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Last week the market (S&P 500) battled resistance at the 1100 mark as if it were in the yawning sand trap at #14 on Pebble Beach – and Tiger Woods can’t help us out just now.
This battle against resistance has been going on since October 14. Since that date, except for a little dip around Thanksgiving, the S&P 500 has closed each day near the 1100 mark. The high during that period was 1119, but we ended Friday at 1102 and the week before that at 1106. This morning we reached 1117, but ended the day at 1114.
The market’s lack of direction mirrors the news. Last week, the Empire State Manufacturing Survey fell 21 points, to 2.6, after four months of improvement, but the Philly Fed Index, announced on Thursday, increased from 16.7 in November to 20.4 this month; this index has remained positive for five consecutive months. Read more…
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I’ve been reading prominent market pundits predicting everything from the “Crash of 2010 coming” to “Major surge ahead.” With such divergence of predictions, it seems like a good time to remain conservatively long/short in accordance with Sabrient’s SectorCast-ETF value-oriented model.
Although we are in a historically bullish time of year as we approach year end, the quantitative model doesn’t know that, and it’s telling us that all-weather sectors like Healthcare, Consumer Staples, and Utilities are preferable right now to Materials, Industrials, and Consumer Discretionary, which are more cyclical. Nevertheless, the re-emergence of InfoTech is a bullish sign, since no market rally is sustainable without leadership from the Technology sectors. Read more…
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Even if the economy is starting to turn around as noted in many of my posts at ‘Macro View of the Markets’, we are facing a major threat of high unemployment rates overhanging economic growth in the long run. The article entitled Initial jobless claims rise 17,000 to 474,000 Total jobless claims, including extended benefits, top 10 million sums up this overhang:
Over the past several months, the claims data have flashed two somewhat contradictory messages: Fewer people are losing their jobs than were six months ago, but once a job is lost, it’s very hard to find another one.
This most definitely indicates a need for a WH Jobs Summit. Although not much usually happens at such summits it strikes me as a bad decision to exclude from invitation both the United States Chamber of Commerce and the National Federation of Independent Business where the event featured 133 guests. A couple of names should be familiar on the invite list including world famous economists like Joseph Stiglitz, Jeffrey Sachs and lastly but not least Paul Krugman. Well sure enough Dr. Krugman provided a glimpse of what he may have been thinking of when going to the summit at The Jobs Imperative.
Read more…
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It was yet another week of hanging around the1100 mark with the S&P500. It’s not that there weren’t important developments during the week. The trade deficit narrowed much more than expected, and retail sales got a substantial boost in November. Retailers alone sold $314.1 billion of goods, 1.4% more than in October and 2.2% more than a year earlier. Initial jobless claims countered by being a little worse than expected, rising by 17,000 to a seasonally adjusted 474,000 versus the expected 460,000.
But for the week the market didn’t do much of anything, with mid-caps leading the way (+0.5%), large-caps barely positive (+0.1%) and small caps being off less than -0.5%. Incidentally, the dollar was much stronger this week, but it didn’t have the negative impact on the market that it has had over recent weeks.
All in all, you didn’t miss much by sleeping through the week. Could the market be consolidating in advance of a major move? Read more…
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Given the recent market weakness, it’s no surprise that Sector Detector’s long/short portfolios have outperformed. This week, Sabrient’s SectorCast-ETF model remains defensive. Of course, the underlying quantitative model isn’t aware that we are entering a time of year that is traditionally bullish. It simply reads the data and tells us which sectors appear to be relatively overvalued.
Latest rankings: Once again, Sector Detector tells us that Healthcare (XLV) has the best valuation. Its score has come down from last week’s impressive 93 (on a scale of 100) to a still-strong 87, powered primarily by its low aggregate projected price to earnings ratio for the constituent stocks. Read more…
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The market ended last week in a good mood, but is still struggling to gain enough traction for a sustained breakout beyond 1100 on the S&P500. The question in everyone’s mind: Is it simply consolidating in preparation for a big Santa Claus rally? There are certainly plenty of market observers on both sides of the fence.
On Friday, a better-than-expected employment report mitigated earlier concerns about Dubai and the lackadaisical retail sales of Black Friday, and the dollar also closed unexpectedly higher on Friday without cratering the market. The small-cap bulls raced smartly ahead, generating profits for the week between 4 and 5 percent for the smaller stocks, regardless of style. Mid caps and large caps also did well, coming in with profits between 1 and 2 percent. In fact, the S&P 500 reached as high as 1119 during individual trading days, although it never managed to close at a new 2009 high.
Today seemed like Groundhog Day with yet another bullish opening and a slightly bearish close. Read more…
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Just before bed last night, I was checking my emails for any alerts and found the following short note at Sen. Sanders to place hold on Bernanke nomination. It does not seem likely that Sanders will or can block Bernanke’s nomination as the President already showed support for his nomination and Sanders can only delay the process some. From Sanders own newsroom comes:
‘He’s part of the problem’
A Senate panel this week will hold a hearing on Federal Reserve Chairman Ben Bernanke’s nomination to a second term in charge of the nation’s central bank. The appointment is subject to Senate confirmation. Senator Bernie Sanders said he will vote no. “The middle class of America is collapsing; we have seen incredible greed, recklessness and illegal behavior on Wall Street. This guy…missed the boat on the most significant economic crisis since the Great Depression,” Sanders said Monday on “Morning Meeting” on MSNBC. “We need a whole new direction in the Fed and in our economic policies. A direction that stands up for a change, not for the rich, not for the top 1 percent, not for the giant financial institutions, but for the working class and the middle class of this country. Nobody thinks that Ben Bernanke is that person.”
That is, other than the President and most of the Senate. One of sanders loudest complaints that does seem to hold some water was Bernanke’s handling of the TARP process but so many others were involved in that that it hardly can be blamed solely on the Fed Chairman. Some of his other complaints were the Fed did not “stop the casino-type activities of large financial companies”, demanding bailed-out banks lower interest rates on credit cards, unemployment nearly doubled, and 120 banks failed. While it is most definitely true that a lot of stuff has happened on Ben Bernanke’s time, it is hard to place all the blame on him.
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