BY Scott Martindale,
Well, it didn't take long for the bulls to jump on their buying opportunity, with a little help from the bulls' friend in the Fed. In fact, despite huge daily swings in the market averages driven by daily news regarding timing of interest rate hikes, the strength in the dollar, and oil prices, trading actually has been quite rational, honoring technical formations and support levels and dutifully selling overbought conditions and buying when oversold. Yes, the tried and true investing cliches continue to work -- Don't fight the Fed, and The trend is your friend. Looking at the charts, stocks are once again poised to challenge all-time highs. The recent pullback served to refresh bullish conviction, as expected. Overall, this week's fundamentals-based Outlook rankings still look bullish to me, with economically-sensitive sectors Tech, Financial, all-weather Healthcare, and Industrial making up the top four, and with Consumer Services (Discretionary/Cyclical) holding up well. Our trend-following sector rotation model retains a bullish bias and suggests holding Technology, Financial, and Industrial sectors. Also discussed are some alternative highly-ranked ETFs and individual stock ideas from within the top-ranked sectors, and what the model suggests if you prefer a neutral or defensive outlook.
BY Scott Martindale,
When I'm in my sales role, I view every prospective client as falling into one of two broad baskets: those looking a reason to say yes and those looking for a reason to say no. I always try to focus on the former and spend little time on the latter. Likewise, last week's market was dominated by those looking for a reason to sell. And so they did. Good news in the jobs and unemployment reports spooked investors on Friday, and stocks fell hard. However, the real story is that when markets are overbought and hitting new highs on declining volume, investors look for any catalyst to take profits. But make no mistake, all signs point to more upside in U.S. equities. Bulls will simply wait for the moment when investors are again looking for a reason to buy. As the overbought conditions are relieved, that time will arrive once again. From a technical standpoint, this sudden bout of weakness in the SPY chart is healthy, testing support and bullish conviction, and the chart remains bullish in the mid and longer term. Overall, this week's fundamentals-based Outlook rankings look solidly bullish to me, with economically-sensitive Tech, Financial, Industrial, and all-weather Healthcare making up the top four. Our trend-following sector rotation model retains a bullish bias and suggests holding Technology, Financial, and Industrial sectors. Also discussed are some alternative highly-ranked ETFs and individual stock ideas from within the top-ranked sectors, and what the model suggests if you prefer a neutral or defensive outlook.
StyleMap® depictions of characteristics are produced by Fidelity using data from Morningstar, Inc. StyleMaps estimate characteristics of a fund's equity holdings over two dimensions: market capitalization and valuation. The percentage of fund assets represented by these holdings is indicated beside each StyleMap. Current StyleMap characteristics are denoted with a dot and are updated periodically. Historical StyleMap characteristics are calculated for the shorter of either the past three years or the life of the fund, and are represented by the shading of the box(es) previously occupied by the dot. StyleMap characteristics represent an approximate profile of the fund's equity holdings (e.g., domestic stocks, foreign stocks, and American Depositary Receipts), are based on historical data, and are not predictive of the fund's future investments. Although the data are gathered from reliable sources, accuracy and completeness cannot be guaranteed.