Sunday, November 24, 2013

Revenge of the 98 Pound Weaklings - 11/24/13

The Sector Trends blog first noted the rotation out of high relative strength stocks in the October 27 blog post, that continued last week as the relatively benign weekly performance of the indexes belied the underlying turmoil.

The major indexes posted modest gains for the week, led by the Russell 2000's 0.8% gain. Although the Nasdaq is posting gains its underperforming the other indexes over the 1-5 week time periods, and the DJIA is now the leading index over the trailing 5 week period. The superior performance of the Dow and S&P 500 over the trailing 5 weeks suggests investors continue to move into larger cap, and presumably more stable names.

1 Week Gain
2 Week Gain
3 Week Gain
5 Week Gain
13 Week Gain
26 Week Gain
S&P 500
Nasdaq Composite
Russell 2000

The table below shows stock performance for 2000 of the market's most liquid stocks. It is sorted by relative strength tier as of the beginning of the week, and again as of the end of the week.

Stocks that started the week with relative strength > 90 collectively lost -0.8% while stocks that started the week with RS < 20 only gave up -0.33%, all in a week when the Dow gained 0.6%.

Price Performance Week Ending 11/22
RS Tier
RS as of Sun 11/17
RS as of Sun 11/24
90 - 99
80 - 89
50 - 79
20 - 49
1 - 19

A closer examination of the data revealed the culprits of the underperformance of the 90 - 99 RS tier:

- China based companies (13 names) averaged a -4.42% decline
- 3D printers from the Machinery-Mtl Hdlg/Autmn group averaged a -8.47% decline (DDD, SYSS, XONE)
- stocks from the Internet Sector (14 names) averaged a -4.93% decline
- stocks from the Energy-Solar group (6 names) averaged a -6.15% decline

Industry Group Performance:
Healthcare: The October 20 blog post noticed the improvement in healthcare related industry groups writing "Industry groups from the Healthcare sector have made a pronounced move over the past 3 weeks... this performance indicates its worth giving names from the sector a look". Over the past 4 weeks this has been the 3rd best performing sector with a 5.08% gain (third only to Aerospace +8.97% and Apparel +8.28%).

In particular the Medical-Managed Care group, Medical-Services group, and Medical-Long-Term Care group look like they are turning the corner. These three groups each rank in the top 25 of the trailing three week price performance list, but have MarketSmith industry group ranks of 107, 105 and 161 respectively.

Banks: It was another strong week for the banking sector as all US based banking industry groups finished in the top 50 of the trailing 1 week price performance list. Excluding the Banks-Money Center group the smaller regional groups all finished the week in the top 30.

Consumer: The Hsehold-Office Furniture group is showing interesting short term price performance ranking #35 on the trailing 5 week price performance list while climbing +25 in MarketSmith's industry group ranks over the same time period to #123 overall. There are some interesting charts in this group including TPX and HNI.

Energy: The Oil&Gas-Refining/Mktg group has a MarketSmith industry group rank of 171, but ranks #49 on the trailing 5 week price performance list with a 4.9% gain. It's worth giving names from this group a look.

Food: This sector has been pounded. The Food-Meat Products group is the highest ranked group from this sector with a MarketSmith industry group rank of 144, and the average MarketSmith industry group rank for the sector is 158.

However, it appears the sector has bottomed. The Food-Meat Products group ranks #26 on the trailing 5 week price performance list with a 6.3% gain, and the sector average on the trailing 5 week price performance list is 86, vs. an average of 147 on the trailing 13 week list.
All data and charts displayed here are the property of MarketSmith, and are published here with their permission. 

The Sector Trends blog does not make forecasts and does not cheerlead with its commentary. The perspective offered is on current trends in the market, which sectors and groups are rotating, and which stocks from these groups are likely to perform best in a neutral/positive environment. Readers need to provide their own assessment of market health, employ their own risk management strategies, and trade accordingly. In a declining market nearly all equities will suffer, including those found listed here. 

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