Market review 23.05.14
Looking under the hood, plus two standout areas
Every Friday on the Private Twitter feed, I post:
Custom CoT positioning charts
ETF leadership board
Portfolio positions (if any changes)
Today’s blog will touch on all these and more. It may seem like a dull market on the surface, but interesting things are happening, and we want to stay vigilant for tactical shifts.
The chart below simplifies all the significant market transitions of the past five years.
VUG is the US growth ETF and holds 70% in just tech and consumer discretionary. VTV is the US value ETF and is concentrated in financials, health care, and industrials. Both the VUG:VTV ratio and GLD have moved with bonds for reasons I explained previously.
Since around Oct of last year, bonds & gold have been rising. Growth has been outperforming value.
We see this in the ETF leadership board too. Again, tech, consumer discretionary, and gold are leading, while banks and energy are lagging.
I expect this to continue in the short term until we get buying opportunities in the latter. I say this for four reasons:
Leadership board: While tech & consumer discretionary stand out, some ETFs in this space have lost momentum (e.g., KWEB, XSD). Looking at individual stocks, while some tech names are making new highs, many more are weak/breaking down. This breadth deterioration can be an early sign that tech leadership could be coming to an end.
Price Charts: Some of the economically-sensitive parts of the market have been in free-fall for a while (natural gas, lumber, and regional banks). Other areas have only recently broken down and can see their downtrend accelerating. This can continue until perhaps some energy stocks retest the long-term breakouts that occurred in ‘21-22.
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