Current Commentary and Weightings:
06/12/20 Comments: We move XLI to an Overweight, XLV to an Equal Weight. XLI is a strong price chart and accumulation model.
03/13/20 Comments: Sector Weight Notes: We move XLB to Underweight, XLV to Overweight, IYZ to Equal Weight, and XLF to Equal Weight. Our overweights are now XLV and XLRE. These are both strong Accumulation Models. These have strong accumulation models and have held the December 2018 low so far. These are trading well and XLV seems to be over the “Bernie Effect.” IYW is also holding but there are many Over Weight players there. We prefer to look in other areas. Our underweights are XLE and XLB. The reason for the underweight in XLE is that the sector has one of the weakest Accumulation Models and has weakened. XLE has broken support and still has no buy indication. XLB has broken the December 2018 low, and the accumulation model has weakened. . IYZ is improving and is neutral. We have raised this to Equal Weight because it should show relative strength but may not lead a snap back rally. XLF broke the December 2018 lows, and while it should snap back as the coronavirus scare ends, it will probably take more time, and low rates are a concern.
04/15/19 Comments: Sector Weight Notes: We raise XLRE to an Over Weight, lower XLV to an Equal Weight. We raise XLP to an Equal Weight, lower XLE to an Under Weight.
01/23/19 Comments: Our Over Weights are now XLF and XLV. These are both strong accumulation models. XLF is now stronger than XLI, our previous overweight, and it has recovered well from the break of 25-area support. Our Under Weights are XLP and IYZ. The main reason for our under weight in XLP is that the sector has worked well defensively, but lags when the market advances. It also has a weaker than expected accumulation model. XLRE has an improved accumulation model, and if it can break out of this long base REITs could do very well. Downgrading XLI to an equal weight makes sense given the deterioration in the accumulation model and also makes sense from a chart perspective.
10/16/18 Comments: XLB remains a strong accumulation model but a weak chart, as mentioned. Making this an equal weight allows us to upgrade IYW, and also makes sense from a chart perspective.
08/23/18 Comments: We continue with XLI and XLB as over weights, and add XLV as a new over weight. We add XLV as more subgroups, such as drugs, are improving. Our under weights are XLRE and IYZ and we add IYW to our Under Weights also. Tech is looking tired, and we are concerned that the impending Communications Sector (XLC) is going to have an effect on IYW as well.
02/21/18 Comments: We downgrade XLRE to an Under Weight, raise IYW to an Equal Weight. IYW pulled back more than some of the other sectors but has rebounded strongly so we move it to an Equal Weight in spite of continued concerns. We move XLRE to an Under Weight. At first, we were going to underweight XLP but the individual components of XLRE look worse, and we discuss this in the commentary.
06/22/17 Comments: We move XLV to an Equal Weight, and IYW to an Under Weight. XLV is a breakout after an extended period of underperformance. Biotech, one of our bellwethers for XLV, has improved. IYW has had strong selling since the last Sector Review, and this sector has been extended for some time. The risk is that the “Fang Stocks” are moving from strong to weak hands and could do badly for a while.
03/22/17 Comments: We move XLB to Over Weight, and XLF to Equal weight. XLB has the second strongest accumulation model and is trading better. We have been considering an over weight in XLB for a while. XLF benefits from higher rates, but everybody knows this and the accumulation model is falling off.
12/01/16 Comments: We will Move XLE to an EQUAL WEIGHT and XLV to an UNDER WEIGHT
11/18/16 Comments: We RAISE XLF to Over Weight, and LOWER IYZ to Under Weight. The market has started to advance after the election of Donald Trump. Because of this, we raise XLF to an overweight, and lower IYZ to an underweight in the Large Cap Sector portfolios. Telecom is likely to lag given issues around ATT’s latest acquisition, and rising rates should benefit XLF, which is a short-term breakout.
07/15/16 Comments: We lower XLP to an Equal Weight, and raise IYZ to an Equal Weight. So far, income and defensive names continue to lead, but we are alert to the possibility that this will change. For this reason, we lower XLP to an Equal Weight. At the same time, IYZ has finally broken out of a base, and as technicians we have to respect this and move IYZ to an Equal Weight. This leaves us with XLI as an Over Weight, balanced by XLE as an Under Weight. IYZ may benefit from a predilection for income stocks.
04/15/16 Comments: We now have XLI and XLP as over weights. XLP is making new highs. XLI has strong accumulation models, and is not a popular choice.
01/15/16 Comments: We move XLP to an over weight, and XLF to an equal weight. We move XLU to an equal weight, and IYZ to an under weight. We move XLV to an equal weight and XLE to an under weight. XLF has broken recent lows, suggesting that benefit from rising rates may already be discounted, so we move to an equal weight – we expressed concerns regarding this last month. We move IYZ to underweight as it is breaking down through a Head and Shoulders top and could perform much worse than expected by most analysts. XLV continues to have “fast money” in the Biotech area, and we would focus on Drugs and the big Insurers outside of the “liked” stocks we show. The chart suggests an equal weight is correct. We move XLE back to an underweight as it broke support at the 2012 low, and oil continues weak. Oil prices could bottom in this area, but that does not mean they must advance – a base is more likely.
10/23/15 Comments: Healthcare, in particular, has disappointed on this rally and as a result we will move this to an underweight. XLV (and IBB!) may be weak into yearend. We move XLU to Underweight as it is sensitive to rates, and IYZ to an Equal Weight as we continue to have concerns regarding bonds, as already noted. We discussed the possibility of short-term out performance by XLE in last month’s Sector Review and recommended trading this. Now, it has hit objectives and traders should move back to a strong equal weight.
07/21/15 Comments: We raise XLY to an OVER WEIGHT, raise XLU to an EQUAL WEIGHT, and lower XLE and IYZ to UNDER WEIGHT. XLY is showing strong improvement, and benefits from low oil prices. Bonds may stabilize for a bit at this support, but then rates should slowly rise. XLE has started to break down, suggesting the technical rally we played earlier in the year did not foreshadow improving fundamentals. IYZ has weakened and the stocks look lackluster. We upgraded XLB to an equal weight earlier last month and while not a great chart it is oversold enough to rally on economic improvement. It looks better than IYZ. We moved XLV to an equal weight at the same time.
06/25/15 Comments: We will make the following changes to our Sector Portfolios as of the close today, June 25, 2015. In the Large Cap Sector Portfolio: We will LOWER XLV to an Equal Weight, and RAISE XLB to an Equal Weight. Healthcare’s accumulation models have been weakening for some time.
03/13/15 Comments: We are moving XLU to an underweight, and raising IYZ to an equal weight. This also changes the weightings in our large cap sector portfolio but does not impact the small cap sector portfolio. Why the change? First, XLU was one of the top two sectors in 2014, and IYZ was one of the two worst, beaten only by XLE. The charts suggest it may be time for mean reversion. Second, and important: While utilities outperform bonds on a long-term, multi-year basis in a rising rate environment, there can be short-term problems during periods of sharply rising rates. Our time horizon for sector recommendations is 6 – 12 months, NOT multi-year. Our concern is that the rate picture could become tumultuous, with XLU suffering because of this.
01/21/15 Comments: Based on the Sector Report released today, XLY goes to an equal weight from under and XLB goes to an underweight from equal. This is mirrored in the Small Cap Portfolio for PSCD and PSCM.
10/17/14 Comments:
Based on the Sector Report released today, XLY goes to an equal weight from under and XLB goes to an underweight from equal. This is mirrored in the Small Cap Portfolio for PSCI and PSCM.We move XLF and XLV to overweight, XLI and XLB to equal weight. SPY has fallen around $12.00 since the last Sector Review. This has been a volatile period. Risk on SPY is continued decline to the February low and we note that XLE and IYZ have penetrated their February lows already, while XLI, XLB, and XLY have come perilously close. Of the best performing sectors relative to the February low (XLF, XLV, IYW, XLU, and XLP) the last two are defensive and IYW may be over hyped.
The above is why we reduce XLI and XLB to equal weights and raise XLF and XLV to over weights. In addition, XLF stands to benefit from rising rates, and bonds may have a reversal pattern suggesting higher rates and lower prices are on the horizon. XLV showed big improvement in the accumulation model. In our view this change is the best way to take advantage of the message the correction has sent us so far.
06/03/14 Comments:
XLE has improved since the last Sector Review, but oil itself did not pull back enough to suggest a strong summer driving rally is in the cards. Service stocks are more attractive than stocks sensitive to the price of oil and gas, and with services starting to act better, so we added HAL to our “liked” stocks in the Sector Review three months ago. SLB is also strong, and more are strengthening. Relative performance has improved enough over the last three months so we will upgrade XLE to an equal weight.
This was the worst performing sector is 2013, and we moved it to an equal weight at the beginning of 2014. We now move it back to an under weight as it is starting to lag, and the ATT/Direct TV merger should put a damper on the performance of “T”, a major constituent.
03/17/14 Comments: XLI is still our favorite sector but we move IYW to an equal weight and XLB to an overweight. Tech has rallied, and could pause at this time, as it has advanced 10% from the breakout of the triple top.
01/21/14 Comments: We move XLE to an UNDER WEIGHT (page 11), IYZ to an EQUAL WEIGHT. XLE has weak performance in the strongest seasonal time of the year, and this winter has been very cold. Relative price has been weak since mid-2013 on XLE as well.
08/16/13 Comments: We have made some changes in the sector weightings, which may be a few weeks early. We RAISE XLB to an Equal Weight and LOWER XLE and XLY to Under Weights. We RAISE IYW to an Over Weight. Accumulation models on XLB have improved, and deteriorated significantly on XLY, and in addition XLY has outperformed five years in a row – a sixth would be unusual. IYW has improving accumulation models, is an improving intermediate chart, and often outperforms in the fourth quarter. XLE is ending the summer weaker than expected and often underperforms into October. Some key oil stocks have missed earnings, raising the possibility of negative earnings revisions in the third quarter across the energy sector.
05/17/13 Comments: We move XLY to an Equal Weight, XLE to an Equal Weight. Since the last sector review, the SPY has exceeded our objective of 156 – 161 for this rally, but by less than 4%. Sentiment models have gone negative. However, other technical measures have not yet begun to deteriorate as they would in a major topping configuration. While it continues to look as if the first half of 2013 may be stronger than the second, for this rally to continue at the same rate we should see some improvement in economic numbers. This implies sector rotation and XLE could be the main beneficiary of this for both seasonal and economic reasons. For these reasons, of the lagging sectors, XLE looks to have the best chance to catch up. We will move it to an equal weight in spite of lagging relative strength. At the same time we move XLY to an equal weigh from Overweight. Should stocks correct sharply, XLY may decline more than XLE as it is overextended on a relative basis.
01/23/13 Comments:Per issuance of the January Sector Review, we changed in the Large Cap Sector Model Portfolio the following:
- XLY to an overweight
- XLU to an underweight
- XLB and XLP to Equal Weights.
This more aggressive tilt is in line with our belief that the first half of 2013 will be stronger than the second.
12/14/12 Comments: We upgrade XLI as the accumulation models have moved up sharply, and it performed well on the recent decline.
It is odd for us to underweight XLE at this time of year but energy continues to trade poorly and this again, is what the numbers say to do.