The Lead-Lag Report: Correction...Starts?
Intermarket trends suggest that a correction may be underway just as the Dow hovers around 14,000. Relative behavior is simply not confirming absolute price excitement.
Consumer Discretionary (NYSEARCA:XLY) – BROKEN?
Comments: Weaker-than-expected consumer confidence, combined with rising oil prices, may finally result in a relative top for the consumer discretionary sector after stunning outperformance since late-2008. More time is needed to see if the break below the 20-day moving average will hold, but this may be an ominous sign for the near-term.
Materials (NYSEARCA:XLB) – Abrupt Decline
Comments: Materials have rolled over, as realizations of emerging market weakness kicks in despite China growth acceleration. The sharpness of the move lends itself to a bounce, but it is concerning from the standpoint of a breakdown in commodity excitement.
Technology (NYSEARCA:XLK) – No Love
Comments: Technology has gone round-trip, hugely underperforming the broader S&P 500 (INDEXSP:.INX). The move is largely due to Apple's (NASDAQ:AAPL) weakness, but it does appear that a bottom may be near as the ratio hits support.
Across the board, intermarket trends for cyclical leaders remain exhausted, and defensive trades are staging a comeback. My firm's ATAC (Accelerated Time And Capital) models used for managing our mutual fund and separate accounts remain highly defensive as of last week, as the odds of a correction rise meaningfully right at the point the Dow hovers around 14,000. Unless a significant improvement occurs internally in the market in the coming days, the correction may indeed have started.
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.
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.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.