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The Lead-Lag Report: Market Confusion

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After unrelenting selling, market internals indicate uncertainty over which way to go as a potential turning point in the cyclical trade takes hold.

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LAGGARDS: INCOME TRADE UNDER ATTACK

Utilities (NYSEARCA:XLU) – Yuck



Comments: Utilities severely underperformed in the last couple of weeks following Obama's win as bets increased on dividend tax rate hikes to come in 2013. The breakdown has been fairly substantial, diverging from strength in bonds.

Small-Caps (NYSEARCA:SLY) – Sideways



Comments: Small-caps have bounced around ratio support and are showing no real conviction as to the ultimate relative trend. More time is needed to see if risk sentiment in terms of high beta leadership takes place.

Technology (NYSEARCA:XLK) – Bottoming?


Comments: Following technology's roundtrip collapse, a bottom may be near, which could result in a strong snap-back for the sector. More time is needed to confirm, but from a trading perspective, it seems plausible to play a return to leadership.

Conclusion?

Various important relative levels are getting reached within the markets, and may be a sign of an important turning point. Further downside may be limited, but a rolling-over of the cyclical trade would be an ominous sign for a continued rally into year-end. More time and confirmation is needed for a high conviction trade in either direction.

Twitter: @pensionpartners
No positions in stocks mentioned.

This writing is for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction, or as an offer to provide advisory or other services by Pension Partners, LLC in any jurisdiction in which such offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Pension Partners, LLC expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.

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