The Lead-Lag Report: A Warning for New Year Bears
New Year bears may be in trouble given that various intermarket trends favor bullish behavior in risk assets. For the bulls, the trend remains your friend.
LAGGARDS: TECH WRECK CONTINUES, BUT...
Technology (XLK) – Support
Comments: Technology has resumed its weakness on Apple (NASDAQ:AAPL) but is now hitting against support. The extent of the underperformance has been incredible, but it now appears the some of the bleeding may soon end.
Consumer Discretionary (XLY) – End of the Trend?
Comments: Strength in discretionary stocks may now be over. The group has outperformed for over three years straight, and money appears to be favoring international markets again, which signals a rotation away from domestic and more to overseas markets.
Consumer Staples (XLP) – Meaningful Turn Coming?
Comments: Consumer staples appear to finally be breaking its uptrend, and like health care, is likely due for a period of underperformance as money favors beta and higher risk-taking at the start of 2013. This remains a bullish sign for overall market direction.
Intermarket trends remain bullish, and suggest that independent of continued fiscal cliff fears, the environment continues to favor risk assets. New Year bears who ignore these trends may be in for a rude awakening if continued bullish sentiment and price action gets more accentuated in the weeks ahead.
Editor's note: This update is published every week exclusively for Minyanville, and is compiled by Michael A. Gayed, CFA, Chief Investment Strategist of Pension Partners, LLC.
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