After a lackluster post-4th-of-July week, the market saw more profit-taking this week, with the markets giving up about half of recent gains at the low point today before rallying to close down slightly. Our models didn't fare very well during the week:
Top 20 lost 2.5%, about 0.45% worse than the S&P 500. We had several names pull back in excess of 5%, but nothing was driven by news. Smaller stocks were generally weaker than larger ones, which accounts for our performance short-fall. Next week, our earnings reports begin. We avoided a big plunge today in FLIR, which we had bought earlier this year at 29.57 and exited at 35.98 a couple of months ago. Better to be lucky than smart! While this has been a very challenging year, that was one good move. For those not familiar with why we sold that stock, I refer you to the blog post. Sometimes, it pays to be disciplined. With that in mind, I anticipate that I will sell one of our positions that has moved to within 25% of its target over the next year. I am considering several potential replacements.
CG/B fell 1.4%, while its benchmark lost a little over 1%. Here, we had mixed performance as well. One of our companies, a small bank, reported a nice quarter last night and rose over 6% this week. On the other hand, we endured some big profit-taking in our largest position, which has been a solid performer so far this year. CG/B turns 3 this week. It has been a steady and strong performer, and I continue to think that this style is a great one for our slow-growth economy. I have a name I am considering adding, but I need to think through the sell.
Sector Selector ETF struggled due to its heavy exposure to Financials, which continue to languish at best. We had overcome a lot of headwinds to get performance back in line with the S&P 500, but we lost ground again this week. While I am not pleased with the start to this new model, I am optimistic that it is structured properly and hopeful that we get back on track soon.
Market Outlook
I believe that we are in the middle of a summer rally despite that view not being widely held. The rally began on the Thursday before options expiration (6/16), and it took a while to look solid. This week looked like consolidation - certainly no major damage was done. In fact, among the very largest companies, the action was good, with XOM, AAPL, IBM and CVX (the largest 4 stocks) all rising this week despite the market declining. Big stocks look good - I urge you to check out the charts of the four I have mentioned as well as MSFT, which is finally bouncing, and JNJ, which is breaking to a 52-week high from a tight base. There are certainly several large overhangs that continue to sap confidence, but a solid earnings season and the resolution of the debt-limit issue are likely to draw more buying. For a taste of what a good report can do, check out the action on GOOG today.
Articles
- NASDAQ Momentum Signals Summer Rally - Seeking Alpha
- Dividend Growth Stocks to Consider - TradeKing
Have a nice weekend!
Alan Brochstein
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