Hello Everyone,
Quick comments: This is an audio newsletter, please listen to my audio overlay for my detailed thoughts and review.
I First off I hope everyone had a nice 3 day holiday week. As you know the US cash markets are closed today in honor of Dr King.
Otherwise a few weeks ago I identified the energy and banks/financial sectors as low risk trade opportunities because of bullish symmetry breaks that had occurred, as well as other fundamental information. This year XLE energy ETF is up 16.25% and last year it outperformed the market gaining 53.3%. I think this year we'll also see the energy and commodity area outperform, especially the energy sector, given the lack of re-investment over that last 6/7 years due to the political environment green movement.
Again XLE energy ETF is already up 16.25% for the year, while the bank sector is up 11.25%. Contrast this to $PX, which is down -2.2% and the Nasdaq, which is -4.8% for the year. This year I believe we'll continue to see a rotation out of high growth tech (out of stocks with super high multiples) and into more value. We've already seen a hidden bear market under the surface with 40% of the stocks in the Nasdaq down 50% or more from their 52 week highs. We started seeing troubling signs in the breadth indicators late last summer and in early November.
Short term the market is near a support - I think we either rally from here or we could get a quick break down flush and then bottom. Earnings season is upon us and normally the market holds up pretty well during earnings season, will that be the case once again or not?
Matt
