BY Scott Martindale,
The sudden bearish turn last week has come fast and furious as selloffs are wont to do. And the pullback might have further still to go. But there are several reasons to expect a stabilization or bounce during this holiday-shortened week, and in any case I still expect that it eventually will turn out to be a great buying opportunity leading to higher prices later in the year. No doubt, investors have been protecting capital, and there has been a rotation into the blue chips as the momentum darlings have been slaughtered. A market cleansing like this is both important and inevitable; however, as I observed last week, the market will often throw out the proverbial baby with the bathwater. Overall, this week's fundamentals-based rankings have returned to a neutral bias. Our Sector Rotation Model suggests holding Technology, Healthcare, and Utilities. Also discussed are some highly-ranked ETFs and individual stock ideas from within the top-ranked sectors, and what the model suggests if you have a bearish outlook.
BY Scott Martindale,
Although the large caps set new highs early on Friday, small caps and Nasdaq have not come close to their prior highs. Friday closed with extreme weakness across the board, and it was on high volume. The technical picture and our fundamentals-based sector rankings have both taken a bearish turn, so we might see more weakness ahead. But longer term, I expect higher prices, so an extended pullback likely will turn into a good buying opportunity. In any case, the rotation from speculative stocks into higher quality companies should continue. Indeed, the momentum darlings from biotech, internet, and social media have taken a severe hit, along with many of the highly popular but lower quality/overvalued stocks. Overall, this week's fundamentals-based rankings have taken a bearish turn, with Utilities rising to the top and with Financial and Basic Materials showing marked weakness. Our Sector Rotation Model suggests holding Technology, Healthcare, and Energy in the current bullish climate. Also discussed are some highly-ranked ETFs and individual stock ideas from within the top-ranked sectors, and what the model suggests if you have a neutral or bearish outlook.
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