Sector

Tech has been everyone’s favorite overweight for a while, and because of this Tech has been overvalued. In spite of the last pullback it is still overvalued – but this is not all tech names, rather it is mostly in the MAG 7 and AI names.

Markets fell into April but rebounded earlier than expected. Breadth has improved. Small Cap indexes made new highs.

We still expect a decline into April to reset our monthly indicators. A strong yearend rally should follow.

The trading action over the last few weeks suggests the rotation out of tech is real, but obviously could change and we have to be open to new sectors showing strength.

It still looks as if equities will make a short to intermediate peak at the end of January/beginning of February.

We don’t normally make stock changes in the last Sector Review of the year, but in this case some of our weaker selections may bounce back in a yearend rally.

Breadth flattened out short-term, but the intermediate picture is improving. Small Cap indexes moved out of their inverse Head and Shoulders patterns.