Overview

A holiday-shortened week, so this will be brief, but essentially very little changed. The major indices are at or just below their highs, with sector rotation clearly evident. Breadth remains strong, while bearish sentiment increased as the weakness in tech and growth names continues to resonate and dominate the headlines.

Here's the S&P over various timeframes:-

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The NASDAQ continues to be the main area of weakness, which despite a late recovery finished with a second consecutive close below its 10-week MA, the first since immediately before the election.

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The Dow Industrials and Dow Transports however both put in new highs on a weekly close basis:-

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The Russell continues to hold a narrow range on the weekly, tightly coiled just below its highs:-

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Sector Analysis

Financials lead the way, followed by Industrials, Healthcare, and Materials. All are above their 20, 50, and 200-day MAs.

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Then comes Technology, Consumer Discretionary, Utilities, Consumer Staples, and Real Estate, which are all below their 50-day MA, but above their 200-day. Energy remains at the bottom, with yet another rally attempt thwarted. What looked like a bright start to the week reversed sharply to test the lowest levels since April 2016.

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Away from the 10 S&P Sector SPDRs, the recent consolidation in Biotech via $IBB and $XBI looks very constructive:-

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Alpha Capture Portfolio

A relatively quiet week with our model portfolio -0.4% vs +0.1% for the S&P as it continues to feel the effects of the sector rotation taking place. It's now retraced 6% in the last 5 weeks to take it back to a small positive YTD.

I've seen similar movement in client portfolios which have gone from +12% to +5% over the same period. That strategy has slightly different timeframe and risk parameters, but this has all taken place while the S&P stayed around the +8% mark, more or less unchanged over the past 5 weeks, and just 1.2% below its high.

The conclusion is the same. For the moment this has all the hallmarks of a short-term consolidation for the market, which longer-term remains in good shape in terms of trend, breadth, and sentiment.

This weekend we have one exit signal and two new entries which will leave us with 8 positions, 5% open risk, and 20% cash.

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Watchlist

A fairly broad mix of names this week which suggests even in the weaker sectors there are still some pockets of strength to be found. I'd argue it's also easier to spot them than when a rising tide lifts all boats.

Here's a sample from the full list of 20 names:-

$ESNT

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$DHI

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$MON

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$VEEV

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$MRCY

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$CTRL

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$FIZZ

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