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Sector Rotation Is Churning Beneath The Stock Market’s Surface

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Michael kramer and the clients of mott capital own nflx

First, thank you to Market Watch for picking my Italeave commentary for their call of the day! Thank you!

It was as if Italy never happened for the stock market! Today was another perfect example of nothing materially changing in the marketplace, but equities rallied like wild, with the S&P 500 jumping by 1.27 percent, back to 2,724. But there are warning signs out there for different parts of the equity market, and the charts tell a clear story of that.

The rebound in the S&P 500 was inspiring, but the hurdle still sits at 2,742, so we shall wait, to see if get there tomorrow.

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Banks

The good news is that financials did bounce today, the bad news is that they did not recover their losses. The charts still look damaged. The XLF, for example, rose today only to its opening price from yesterday morning and then faded.

JP Morgan didn’t even get back to its opening price from yesterday.

Nor did Citigroup or Bank of America. I’m not going to show you every chart. But it surely must mean something right? In fact, today’s volume in Citigroup was about half of what it was yesterday, with 18 million shares trading today to yesterday 37.6 million yesterday. Bank of America was the same, with roughly 79 million shares trading to yesterday’s 135 million, so was today’s price action because of an absence of sellers in bank stocks? Potentially.

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Technology

Now we can look at the XLK ETF and notice the difference with the group recovering all its losses from yesterday.

Nvidia jumped to a higher price, and on better volume.

Consumer discretionary stocks also recovered all their losses, with Netflix and Amazon being two such examples.

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Materials

The materials XLB look similar to the XLF.

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Staples

Meanwhile, those staples, look at them moving higher!

Both the XBI and the IBB surged today, and much higher than yesterday’s highs. I’m not going even to show the charts.

Go back to the basics, which sectors that are likely to do well in a falling interest rate, rising dollar environment? Well, staples, tech, and biotech for example. Which areas are bound to do poorly financials and materials, yes. Multinationals? Think McDonald’s.

It would seem to me there is a big rotation going on in the marketplace right now. Well, see where it tomorrow goes.

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Mott Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future.

Tags: #sp500 #banks #materials #tech #staples #discretionary #netflix #nvidia #jpmorgnan #bofa #citigroup