First, Santa Claus showed up for his rally. Now the "First Five Days" of the year were up. That's two for two so far in the January Trifecta, states JC Parets of

So now what's next? The January Barometer is the last leg of the early-year triple crown. "As January goes, so goes the rest of the year". According to my handy Stock Trader's Almanac, the S&P 500 (SPX) has an 83.3% hit rate when January is in the green.

So, with more and more positive signs for stocks, it really shouldn't be a surprise to anyone. The trend for most stocks has been up and to the right. That was a strong back half of 2022 and a very strong fourth quarter. And not just in the US, but we're seeing breadth expansion internationally. The weaker Dollar has certainly helped. And while our Neutral approach for the S&P 500 remains intact, underneath the surface things look so much better.

Here's the S&P 500 still stuck below overhead supply, hence the neutral outlook that we've had.


But when you look at individual sectors and you look at stocks on their own, almost all of them are well off their lows, with most sectors up double digits and above their 200-day moving averages. The S&P 500 has an irresponsible amount of Tech and Growth exposure. That's great when those sectors are working, but that's obviously no longer the case. In fact, it's all the other stocks except those that have been working. A great example can be seen in Consumer Discretionary, one of the most important groups of stocks, in both the US and the world.

On an equally-weighted basis, no sector has performed better since the market bottomed last June. But take a look at the difference, and more importantly, why. With the equally weighted Consumer Discretionary Sector up almost 20%, the Market-cap-weighted version is flat. That's because its largest two holdings have lost investors more capital than almost any other stock in the world during this period. Amazon (AMZN) represents 22.5% of the Discretionary Index while Tesla (TSLA) comes in at 14.25%.

With both of these stocks getting clobbered while almost every other stock is up during this period, it puts a lot of pressure on Discretionaries. That's why you need to look underneath the surface to see what's actually going on. Most stocks are going up. These are just a few of the ones that aren't. But whose problem is that? Not ours.

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