As I suspected it might, the stock market bounced strongly last week. Weakness the prior week was due in part to traders exiting positions for vacation during the holiday-shortened week, protecting big capital gains, cashing out to pay taxes on capital gains, and 'delta hedging' on put options. However, I'm not convinced that the pullback was sufficient to create the next great buying opportunity. In any case, wringing out some of the excesses has been healthy for the market. Among the ten U.S. business sectors, the big winner last week was Energy, but defensive sector Utilities still stands alone as the year-to-date leader. Overall, this week's fundamentals-based rankings have returned to a slightly bullish bias, but the near-term technical picture is more neutral than bullish. Our sector rotation model suggests a bullish stance by holding Technology, Healthcare, and Industrial. 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.

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.