Last week was a methodical session that saw significant indices trade with an upside bias and in narrow ranges. There were also more signs of rotation last week. There is a chance last Friday’s session could be a template for the rest of the year. Energy (XLE) is breaking out, and Financials (XLF) are rebounding once again. I continue to love the fundamental story of industrials (XLI) and Materials (XLB).

However, it is unclear if this market can rally without those three growth sectors. At some point, we will find out. For now, we’ll maintain high exposure. One thing is certain: we do not want Utilities (XLU) and Consumer Staples (XLP) to take the lead.

Inflection Point

For the first time since the third quarter of 2021 (3Q21), earning estimates have shifted into the plus column after the first two months of the quarter.

Here’s the rub: Earnings are still expected to be powered by the big three growth sectors.

Ready to Gush?

Keep an eye on crude oil. West Texas Intermediate (WTI) climbed above key moving averages, then pulled back to test them as support – and held. We could be looking at a nine-handle on crude oil real soon.

Portfolio Approach

There are no sector weighting changes in the Hotline Model Portfolio this morning. We closed a position in Materials on Friday.

Today’s Session

Don’t look now, but the biggest news this morning is Saudi Arabia and Russia extended cuts to production through December.

This is sure to keep crude moving higher, although there are lots of headlines overnight on less demand from China and India.

We are watching the CRB Index on the verge of a huge breakout.

Comments

I was looking for information on the CRB Index and found a wonderful resource at Trading Economics, tradingeconomics.com. It is a vast database on commodities, stocks, bonds, currency, countries, indicators, etc. and could be a great resource in case you are interested. Johnny Kohl on 9/6/2023 12:15:33 AM

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