Everyone seems so concerned with the market these days. One of my favorite trend indicators, the view of Investors Business Daily, clicked "market correction" late in January. Bob Prechter is bearish again, a place he likes to be anyway. When it was all said and done, January was disappointing but not that surprising. Ultimately, it was just two bad days. I had shared a view with my friends at TradeKing late in the year suggesting potential profit-taking ahead. If you review that article, which listed 58 names (29% from Tech) that I felt were vulnerable, you might be interested to learn that the average decline was over 6%, well behind the overall market. Check out things like emerging stocks too - anything that rallied hard in 2009 paid back some of the gains in January. I had discussed the rotation issues earlier this month, and the chart got even clearer. I don't have the time to update that graphic that I shared, but clearly the two strongest areas of the market last year have been hardest hit this year: Technology and Materials.
Here is what the returns across market caps and by sector look like so far this year:
I color-coded this so that the reader can quickly focus in on areas of strength and weakness. Green indicates beating the market by 2% or more, while red reflects the opposite. While we see some areas of "strength", note that the only sector up for the year so far is large-cap Healthcare. A few quick observations:
- Market cap didn't matter so far (check out my view on December being the new January for Small-caps), but Sector did
- Tech, last year's big winner, is clearly the big loser - Materials too
- The "middle of the pack" from last year continues to do relatively well, but the laggards are lagging still (Utilities, Telecomm)
I don't have much more to add - clearly Tech, which started the year at 19% of the S&P 500, is the major drag. It makes sense - profit-taking.
I continue to like my portfolio positioning in the Top 20 Model Portfolio. We were actually up on the month. Again, we are heavily weighted towards smaller, value-oriented names from predominantly the Industrial, Healthcare and Consumer Discretionary sectors, with no exposure to Materials or Energy and very limited exposure to Technology (we picked up a name after it dropped sharply).
I shared my views earlier this month that I think that we are still in a bear market. With that said, though, I don't think that this past month's action is troubling, at least yet. I continue to think that the market grinds higher into March.
Disclosure: No stocks mentioned
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