Courtesy of Scott Martindale, Sabrient Systems and Gradient Analytics
Like the nice employer who never fails to pay a Christmas bonus every year, Santa seems bound and determined to give bulls the year-end rally they have come to expect. But bears aren’t going away quietly–although bulls got some unintended help from the bears with Tuesday’s short-covering-fueled rally.
Among the ten U.S. sector iShares, Energy (IYE) has been the leader so far this week through Wednesday, followed by Consumer Goods (IYK) and Basic Materials (IYM). The big laggard has been Technology (IYW), due to Oracle’s (ORCL) disappointing earnings miss. In fact, through Wednesday, IYW was the only one of the ten sector iShares that was in the negative for the week. Nevertheless, the rest of market seems to be ignoring any broader implications of the ORCL report, which is a positive thing.
One market segment that has been consistently strong in this unpredictable market is the Pharmaceuticals industry, which is a subset of the Healthcare sector, and is a pocket of strength that keeps the iShares Dow Jones U.S. Healthcare ETF (IYH) consistently scoring highly in the Sabrient SectorCast rankings. In fact, IYH ranks at the top this week.
Looking ahead, investors certainly have plenty to worry about. As usual, the main story is the lack of a confidence-inducing solution to the debt crisis in Europe. The credit rating agencies have been downgrading credit in the region, while the ECB has refused to aggressively buy bonds to keep rates down. However, the ECB did come through with a bigger than expected refinancing operation in 3-year loans (rather than the standard 1-year) to European banks. A European solution would keep a solid bid under the euro, but otherwise the dollar will be relatively strong, which hurts both stocks and commodities.
Beyond that dicey situation, we have the polarized U.S. Congress, which has given us the U.S. budget ceiling non-solution and now the threat of expiration of the payroll tax cut and unemployment benefits. Then there are the potential instabilities from the U.S. presidential election process, Russian elections, economic slowdown in emerging markets, North Korea’s leadership succession, the threat…