Last week the markets rallied…again. The short story is we were on the right side of this move and made money, states John Person of PersonsPlanet.com.
Typically, we tend to see for most major averages a seasonal decline into mid-month then upside reversals for a “Santa Claus rally. This pattern excludes the QQQ’s, which tends to decline all month. This year, of all others, is quite different and the technical outlook remains positive with a massive rotation underway in “re-opening the economy” sector stocks.
Materials, Aerospace Defense, Energy, Financials are leading the move. Last Thursday we were setting up for a potential pullback as the advance-decline comparative ration lines were starting to show a price-to-indicator divergence. That all disappeared on Friday as the market posted a super-strong performance, not so much in percent change gains, but in positive indicator readings for both the daily and weekly time frames.
As for the market’s rally last week, it was a broad-based move with the exception of certain tech names, specifically Amazon (AMZN), Microsoft (MSFT), and Zoom (ZM). A few high-profile consumer discretionary and staples stocks that generated sell signals Clorox (CLX), Whirlpool (WHR), and Sherwin-Williams (SHW). We took advantage of that rally by taking profits on some stocks and certain option positions. I am not looking to sell this market “short” just because its “too high” or because the few stocks listed above had either weekly losses or gave weekly sell signals. While these stocks have an influence in “cap weighted” index values, it appears the money is rotating in other sectors that is support the indexes values.
One item that we might be a bit concerned about longer term is the weakness in the US dollar. Treasury bond prices declined, as yields rose making me wonder if money is leaving the US or simply rotating into other equity sectors and foreign equity markets, such as Emerging Markets (EEM) with a directional flow into India and perhaps Latin America (ILF). The EEM did post a new high not seen since January 2018.
Next week I am concentrating on buying stocks in seasonally strong sectors that include Insurers with Prudential (PRU), Energy with Phillips 66 (PSXP), Materials with DuPont (DD) and Mosaic (MOS), along with Raytheon (RTX) in Aerospace/Defense with one beverage company, Keurig/Dr. Pepper (KDP). Entries stops and targets are posted in the table below.
*Raised bids and or stops.
There is no doubt this year gave investors a wild ride, but it was one of our best in terms of profitability in trading. The Razor Focus class that we held in January was certainly an amazing program with the SPY trading models and the Summer School Algo models were not too shabby either! If our paths do not cross until 2021, let me say Merry Christmas, Happy Holidays, and most of all cheers to all and here is to a better year ahead for all of us in 2021!
Here are the Year–to-Date (YTD) & Week-to-Date (WTD) Performance Figures:
S&P 500 (SPY) up +16.54% / weekly: +1.69%
NASDAQ 100 (QQQ): up +44.47% / weekly +2.18%.
Dow Jones Industrial Average (DIA): up 7.89% / weekly: +1.12%
Russell 2000 Small Cap Sector (IWM): up 14.88% / weekly: +2.09%
To learn more about John Person, please visit PersonsPlanet.com.
