Yesterday, ten out of eleven sectors were higher, with Energy stocks succumbing to the urge of investors bailing out of big winners to go on the hunt for the next hot spot. Interestingly, many of these same traders dumped Technology and Communication Services to get into Energy in January and February.

These kinds of zigzags have less to do with underlying fundamentals and everything to do with the notion of beating the market on a daily basis. Even for professional traders, this is folly, especially for those that call themselves investors but freak out when their portfolio isn’t up as much as the broad market on any given day.

Cruise ships won’t have to require vaccinations when they resume sailing, the Centers for Disease Control and Prevention (CDC) says

Consumer Discretionary led the way, as cruise liners outperformed, but automakers General Motors (GM) and Ford (F) enjoyed strong sessions after being upgraded. A smattering of brick-and-mortar retailers were also higher.   

Google (GOOGL) and Facebook (FB) took off, and video game-related names lifted Communication Services.

S&P 500 Index	+1.44%
Communication Services XLC	+2.11%
Consumer Discretionary XLY	+2.27%
Consumer Staples XLP	+1.28%
Energy XLE		-2.39%
Financials XLF	+0.78%
Health Care XLV	+0.70%
Industrials XLI	+1.24%
Materials XLB	+1.23%
Real Estate XLRE	+0.52%
Technology XLK	+2.07%
Utilities XLU	+1.09%

Bond Boom Pause?

The 10-year bond yield has been relentless in its upside move, so it stands to reason that this week should see a move through the recent high point. If by same  token, there is a pullback, 1.60% is initially the key support.

The session’s intrigue is how much mega growth names held up even as the 10-year yield was higher and pressing near a key breakout point.

Market Breadth

Market breadth and overall volume were a lot less than one would have imagined, particularly on the NASDAQ Composite. 

Market Breadth	NYSE	NASDAQ
Advancing	2095	2498
Declining	1238	1670
52 Week High	318	269
52 Week Low	15	39
Up Volume	2.43B	2.40B
Down Volume	1.65B	2.04B

Portfolio Approach

Yesterday, we took profits in Consumer Discretionary and Technology and added to Materials in the Hotline Model Portfolio.

Today’s Session

There is a good article in the WSJ on the phenomenon of momentum trading taking over the market.  I have been writing about this phenomenon for weeks now.

White-Hot Stock Rally Masks Mammoth Value Swings

https://www.wsj.com/articles/white-hot-stock-rally-masks-mammoth-value-swings-11617701401?mod=djemwhatsnews

These momentum moves come at the expense of stocks and sectors that suddenly fall out of favor.  In the process, this creates oversold conditions and opportunities for those that are patient, and of course, big money-making opportunities for those that are nimble.

Interestingly, though, many investors that think they are nimble often move late, and are caught in positions at higher entry points, as the momentum crowd has moved once again.  This becomes a momentum of truth or test to see if these investors can be patient.

Part of that process means knowing if the fundamental underpinnings of the stocks they own are worth holding.  Right now, most seem content on taking hits to keep chasing the crowd.   I think it’s time for investors to take a pause and assess positions based on underlying fundamentals more than the direction of the share price. 

Remember, in the end, fundamentals rule.

 

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