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The Lead-Lag Report: Return of the Cyclicals


Market internals continue to look quite bullish, and near-term continuation of the uptrend seems more likely to continue than not, with energy looking particularly interesting.


Consumer Staples (NYSEARCA:XLP) – Broken

Comments: Consumer staples have badly underperformed the S&P 500 (INDEXSP:.INX) since mid-December 2012, and the trend lower appears to be in its early stages. Continued weakness is a good sign as it suggests persistent risk-taking is underway. I suspect weakness will continue until sentiment sours, potentially in February.

Energy (NYSEARCA:XLE) – Rally Coming?

Comments: Energy looks ready to rally in a catch-up trade to materials, industrials, and emerging markets. The changing supply dynamics due to fracking have held the sector back, but I suspect a move higher will soon result on increased demand expectations.

Bonds (NYSEARCA:TENZ) – Asset Rotation

Comments: The rotation out of bonds and into stocks continues, and the trend remains very favorable. Continued weakness suggests the environment favors equities independent of any kind of concerns over the coming debt ceiling fight... at least for now.


Intermarket trends remain bullish despite continued talk about fading the strong start to 2013. Deterioration appears unlikely to kick in any time soon, but various ratio resistance points need to likely get breached before another true leg higher. Our ATAC models used for managing our mutual fund and separate accounts remain positive on stocks until price says otherwise.

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.

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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