January 20, 2014 Executive Summary

Total Market:

  • Mixed week in the markets that also came with mixed breadth readings.
  • Short Term are softening and getting mushy, not giving any clean signals which might be a short term negative in itself after 4th quarter strength, so caution level is up slightly.
  • On the plus side, RS Rankings remain solidly tilted to Small Caps and Growth.
  • Longer Trend and Breadth remains strong and continues to hold steady or improve this week.

Broad Sectors:

  • The strength in Defensive Sectors didn’t really standout again this week.  Overall, things are still favoring cyclical and growth sectors as well.
  • The AD Lines and McClellan Summation are starting to show more differentiation and loss of correlation.  Those are the types of markets this type of research helps the most in.
  • McClellan Indicators still showing strength in many places, but the recent softness in Consumers and now Financials is worth keeping tabs on, but not a red flag here.
  • Health Care continued to shine this week and is getting short term hot, but so many names that can become part of the rotation.  It will be interesting to see if money leaves or just rotates from high RS (or from high valuation maybe?) to low.
  • Financials have been leaders and need to remain in the game.  That said, the current weakness in the sector breadth is concerning from a broader perspective and means new investment here should be selective until the breadth begins to improve.  Current positions should get greater scrutiny in the coming weeks.

What We are Watching:

  • Small caps continue to perform well and have not given us a reason for concern yet. $IWM $IWO
  • Growth continues to pull away from value and should remain the focus. $IWO $QQQ $IWP
  • Sector concentration should lean toward Growth and Cyclical sectors (including Health Care). $IAI $IYJ $XLK $FDN $SMH $ITA $IYT $IYF $IBB $IYH
  • Financials looking a bit tired, question is are they resting or retreating?  We don’t know yet. $IYF $IAI $BIZD $RYF $PSP
  • Don’t forget Basic Materials highlighted a few weeks ago.  Still looks like longer term breakouts and reversals going on here. $IYM $GDX $SILJ $URA $GNR $MOO $XLB

Thanks for taking the time to review this report.  If there are any other improvements I can make, I would love to hear them.  Please email me at gtlackey@gmail.com and please include your Stocktwits or Twitter handle.

Good luck this week.  It is there for the making!

G. Thomas Lackey Jr, CMT CFP®

Follow me on StockTwits and Twitter @gtlackey
(All market data above are derived from Stockcharts.com, Esignal, and Reuters Datalink)
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