Courtesy of Scott Martindale, Sabrient Systems and Gradient Analytics
Despite Wednesday’s stock market weakness, selling remains contained. Round-number resistance-turned-support levels at 13,000 on the Dow, 3000 on the Nasdaq, and 1400 on the S&P 500 have held up. The S&P was the last to breakout and the first to test support. In fact, it has been testing support at 1400 almost every day since it broke out two weeks ago.
For its part, the Nasdaq 100 Index, which is tracked by PowerShares QQQ Trust (QQQ) and is dominated by Apple (AAPL), has held up the best. In fact, as AAPL continues its inexorable trek “to infinity…and beyond,” QQQ is on track for its 13th consecutive weekly gain. This is an even longer streak than the 11 straight weeks back in 1999, thus bringing up the inevitable comparisons to that heyday of “irrational exuberance.”
Many market observers who have doubted this rally since the beginning are throwing up their yellow caution flags yet again. Eventually they’ll be right, as the market can’t go up forever. But I’m not seeing any major worries reflected in either the charts or the Sabrient SectorCast quant rankings.
Among the ten U.S. sector iShares, Technology (IYW), Healthcare (IYH), and Financial (IYF) have been the strongest this week through Wednesday, and they remain the top three in the SectorCast rankings. Energy (IYE) has been the decisive laggard this week, down more than 2%, followed by Materials (IYM) and Telecom (IYZ). Bank stocks were leaders on Wednesday, and in fact the Financial sector ending up finishing positive on a negative market day.
Not surprisingly, given the market’s strength since the start of the year, the more aggressive and economically-sensitive sectors like Financial, Technology, and Consumer Services/Discretionary have shown the best year-to-date performance. Last year’s leader Utilities, the ultimate defensive sectgor, has been a laggard.
Although Europe is sinking into an inevitable recession, fears of a global recession have subsided, and Greece seems stable for the moment. Nevertheless, risks remain. Sabrient’s newest publication for investment professionals examines those risks within a scenario analysis. The MacroReport is co-published with MacroRisk Analytics (MRA), a firm that provides a scientifically tested methodology for measuring the economy’s influence on investment prices. Each month, The MacroReport focuses on a specific macroeconomic situation or global hot spot. The inaugural March report focused on the Eurozone, and you can view it here: The…
