The Fred Report - Sector Review July 2016We forecasted a strong second half in our yearly forecast. This now looks likely, and one big question is whether there will be some big leadership/sector changes as this evolves? So far, income and defensive names continue to lead, but we are alert to the possibility that this will change. The Fred Report - Sector Review June 2016SPY is up just less than 2 points since the last Sector Review; it is basically unchanged year over year. We have been expecting more choppiness and corrective behavior into June, and then a strong second half. The weekly stochastics, and other indicators, suggest that a correction into July is now possible but the next weekly stochastic buy should result in a strong second half, unless the market advances from here.The Fred Report - Sector Review May 2016The weekly stochastics, and other indicators, suggest that a correction into June in line with forecasts is certainly possible and we are positioned for that eventuality. XLP made new highs. XLI has strong accumulation models, and is not a popular choice, yet it is trading well – invalidating the Head and Shoulders topping pattern noted in past venues.The Fred Report - Sector Review April 2016SPY is up around 3 points since the last Sector Review; it is basically unchanged year over year. We expect more choppiness and corrective behavior into June, and then a strong second half. We have adjusted sector weightings a bit, as noted above. We think this is a good mix of an offensive and defensive allocation.The Fred Report - Sector Review March 2016XLP is making new highs. XLY has strong accumulation models, but may be too popular. We continue to watch XLB and XLI carefully, as they could emerge as leading sectors – and stochastics have started to show some relative strength. The Fred Report - Sector Review February 2016SPY is down around 1.50 points since the last Sector Review, but it has been a good bit lower throughout the month. Caution flags are out. We will leave sector weightings the same for now – the market may be making a tradable bottom and if so we may make changes intra-month.The Fred Report - Sector Review January 2016We were expecting a down first week, but the start to 2016 is weaker than we expected and caution flags are out. We are adjusting sector weightings to reflect a bearish market structure, until the markets broaden out.The Fred Report - Sector Review December 2015Stocks are now resolving the short-term overbought readings in the technical indicators, but in the grand scheme of things this is not significant. This has been a relatively flat year. What changes could we see in 2016? We are watching XLB and XLI carefully.The Fred Report - Sector Review November 2015Last month we made some changes to sector weightings and this month we leave them alone. This makes sense as we believe the market should be narrow into yearend. Those FA’s seeking high performance (with accompanied higher risk!) should choose stocks within 10% of their highs in all sectors. We would not do this ordinarily. This does not sound like investing, and is designed to take advantage of “performance chasing” on the part of big funds into yearend.The Fred Report - Sector Review October 2015Last month we decided not to change allocations abruptly for trading purposes and left them as they were. This made sense as we can see some changes in leadership as the market has recovered. The Fred Report - Sector Review September 2015Stocks are now reflecting the weakness we have seen in the technical indicators. Should market action continue to unfold as we are expecting, a retest of the low could take place in early to mid October. This creates an interesting question regarding this report – should we change allocations abruptly for trading purposes or leave them as they are?The Fred Report - Sector Review August 2015The Dow Industrials had two down quarters (without getting horribly oversold!), and our forecast remains for a rally in the second part of 2015. A breadth surge should confirm this is underway. We continue to look for the McClellan Oscillator to move above or below 200 to signal a surge in either direction.The Fred Report - Sector Review July 2015XLY 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.The Fred Report - Sector Review June 2015Our underweight XLB improved as the oil market has rallied, and oil could rally into June/July. Oil fulfilled our objectives for how a bottom should be made in January. Traders could again overweight XLE on a tactical basis through the end of July. XLP has weakened and we now have concerns. This is a possible underweight if it does not improve.The Fred Report - Sector Review May 2015SPY is up about 2 points since the last Sector Review. We are sorry stocks are so dull, but cannot control this outcome. Smaller stocks continue to improve a bit on a relative basis. To put this into perspective, the average range on SPY is around 2 points – so we have had one day’s trading range as the gain for the month.The Fred Report - Sector Review April 2015We remain with XLF and XLV as over weights. XLF stands to benefit from rising rates but looks to be a second half story. XLV has continued to trade well in a choppy market so we stay with this for now – we keep thinking we should downgrade this but cannot find an adequate technical reason to do so. We remain under weight XLB and XLU, but are watching XLU carefully as it is a great bond substitute on a multi-year basis. The Fred Report - Sector Review March 2015XLU 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. 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. The Fred Report - Sector Review February 2015SPY has been up about 10 points since the last Sector Review. This is because the last few days have been strong. Smaller stocks continue to improve a bit on a relative basis. We remain with XLF and XLV as over weights. XLF stands to benefit from rising rates. Our new under weight XLB has improved as the oil market has rallied, but should weaken again as oil retests.The Fred Report - Sector Review January 2015We remain with XLF and XLV as over weights. XLF stands to benefit from rising rates. Our new under weight XLB has weakened as the international economy weakens. IYZ is flat to weak and did not perform defensively in the recent market turmoil.The Fred Report - Sector Review December 2014SPY has been down a bit (roughly 3 points) since the last Sector Review. This has been a volatile period. Smaller stocks continue to lag; the broad-based index, NYA, is still underperforming, and bearish sentiment is still low, a concern. SPY is basically unchanged since September.
