Sector Detector: Defensive sectors lead hesitant market, but traders honor long-standing bullish supportBY Scott Martindale, Sabrient - 03/30/2015
Last week, the major indexes fell back below round-number thresholds that had taken a lot of effort to eclipse. There has been an ongoing ebb-and-flow of capital between risk-on and risk-off, including high sector correlations, which is far from ideal. But at the end of it all, the S&P 500 found itself right back on top of long-standing support and poised for a bounce, and Monday's action proved yet again that bulls are determined to defend their long-standing uptrend line. As we reach the end of Q1, the top performing sector so far this year has been Healthcare by a wide margin, followed by Consumer Services (Discretionary/Cyclical), and then Telecom, which are all defensive (or all-weather).From a technical standpoint, the SPY chart remains bullish as yet again, for the sixth time in less than four months, the lower uptrend line of the long-standing bullish rising channel is providing reliable support, and the small-cap chart is even stronger. Overall, this week's fundamentals-based Outlook rankings still look mostly bullish to me, with the top four (and six of the top seven) economically-sensitive or all-weather. Our trend-following sector rotation model moved to a neutral bias at Friday's close, and suggests holding Technology, Financial, and Healthcare 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,
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.
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