Banks, Energy, and Healthcare Setting the Tone for 2021

Last week was another amazing run to newer all-time highs for the S&P 500 while the Russell posted an incredible weekly gain of 5.93%, states John Person of PersonsPlanet.com.

The move was fueled by energy (XLE +9.29%), industrials (XLI +6.22%), materials (XLB +5.69%) whereas the weakness came from utilities (XLU -.59%) and consumer staples (XLP -.82%). One, if not the top-performing stock was Tesla (TSLA), it gained a staggering 24.71% on the week. Its forward price-to-earnings ratio now stands at 1,682.64. Compare that to Amazon’s, which is at 93, Apple is at 40, and Netflix is at 82, kind of makes you wonder if the stock price will reach Mars before Elon Musk will, right?

Stellar gains were not just reserved for equities, Bitcoin gained 40% last week, 30-year bond yields rose, as we underwent an 8% gain in the yield ETF (TBT). Here’s the shocker, the volatility index (VIX) only fell 5.23% and closed at 21.53. Historically high compared to the supposed inverse relationship it has with an equity market posting new record highs. So, who has it right? Stock traders buying everything or volatility traders not betting for happy trails ahead? 

Despite that question, last week was one of the best starts to a year. Due to this unprecedented rally, I took advantage of taking profits in DuPont (DD) as it gained 15% last week, along with a few others like Schlumberger (SLB), which posted a gain of 13.79%. I also unloaded Prudential Insurance (PRU) and Raytheon (RTX) since both names were not “outperforming” or keeping up with the broad market’s percent move. The fact that the market shrugged off the negative monthly unemployment report, (approximately a 140K job loss to the US economy) makes me think that any stock not moving up with this move should be offset, and any stock that had accelerated gains, but with poor technical indicator readings, should best be liquidated.

Looking ahead, this coming week I’m sure we will be hearing more news on political fallout due to the raid on Congress. Wednesday we will hear from Federal Reserve head Jerome Powell, and then Friday marks the beginning of earnings season with a few major bank stocks.  With a new Administration coming in after January 20, I am sure we will see some “rotation” or a correction at some point, after all it's hard to imagine the stock market gaining nearly 2% every week. If there sone thing that remains constant in our world, it is change.

Technically Speaking: Weekly Persons Pivots show a continued bullish outlook along with the monthly and quarterly Persons Pivot outlook. The daily volume trends increased in the (DIA) and the SPY but not in the other major indexes. In fact, the Russell 2K declined. According to the CFTC COT data hedge funds and small specs are heavily long the Russell 2K futures. This suggests it is ripe for a pullback. The breadth indicators show both the daily and weekly analysis remains positive and supported last week’s rally. Yet the McClellan Oscillator is slightly above its “zero line” and vulnerable for a reversal if it closes back below its respected “zero line”; the takeaway here is it is not in an overbought condition. 

We had some interesting names generate weekly sell signals, however, until I get a stronger sell signal in the broader market, I am not looking to take short positions in individual stocks, at least not just yet. The fact is, we still had more PPS indicator buy signals populate than sell signals and many stocks closed Friday greater than their respective monthly open prints. Typically, this is a positive sign for higher equity prices, or at least suggests the lows for the month may have been established. Therefore, next week I am adding to Marathon Pet. (MPC), which has a 5.37% dividend yield, and would like to use the scale in approach in Hollysys (HOLI), Cardinal Health (CAH), and a large regional bank, Truist Financial, formerly BB&T and SunTrust Bank (TFC). See the table below for entry levels, stop loss levels, profit targets, and expected holding period.

Weekly Bullish PPS & LCD Signals: CRS, CAH, CARA, EPR, GWPH, HOLI, MPC, NBLX, RDS.A, TLRY, TRIP.

Current positions:

• Long full position in Junior Gold Miners (GDXJ) $41.46 using Feb. 19th Exp. 45 put option in lieu of stop.
• Long full position in Walgreens (WBA) $39.22 using Jan. 15th Exp. $32.50 put option in lieu of stop.
• Long 50% position in Marathon Pet. Corp. (MPC) $36.58, add 50% at $40.67, stops at 37.19.
• Long full position in Kraft Heinz (KHC) at $34.72, using $31.71 as the stop.

To learn more about John Person, please visit PersonsPlanet.com.