The powerful reversal from last week gained legs and can now be called a rally. All three models posted strong absolute performance in what was the best week in over two years for the market and have advanced relative to their benchmarks so far in October:
Top 20 rocketed 8.14% for the week, besting the S&P 500's 6.01% gain. So far this month, the model has advanced 11.6% compared to the S&P 500's 8.4% gain. Top 20 has also rallied more than the Small-Cap Russell 2000 index, which has increased an impressive 10.7%. The model is now down just slighly year-to-date, trailing by 1.6%.
Conservative Growth/Balanced rose 3.2% this week, trailing its stock/bond index by less than .3%. As I have suggested in the past, it can be quite challenging to chase a rocketing market with "conservative" stocks. With that said, the model is up 4.4% so far this month, .8% more than the benchmark. YTD, the model is now in the green again and is 1.1% ahead of its index.
Sector Selector ETF rallied strongly, benefiting from some of our recent shifts and gaining 7.5%, which was 1.5% better than the S&P 500. So far this month, it has increased 9.8%, also 1.5% better than its benchmark. While we have recovered some of the poor performance over the past 5 months since we launched, the model remains 2.7% behind the S&P 500.
Outlook
Certain parts of the market have moved into the green again for 2011, though the broad market, as measured by the S&P 500, is still slightly in the red (-1%, including dividends). Smaller stocks remain down over 8%. The NASDAQ 100, aided by AAPL, AMZN, CELG, INTC, SBUX and a few others, is in spitting distance of an all-time high. I like to look at the 10 sectors of the market in order to get a better sense of what's going on. While a few are down big (Financials, especially, as well as Industrials and Materials), 5 sectors are actually up on the year: Consumer Staples, Consumer Discretionary, Utilities, Healthcare and Technology. These 5 sectors account for about 58% of the S&P 500 in terms of market cap. As of Thursday night, less than 40% of the market was up so far in 2011, highlighting how the gains have been concentrated in a few large names, like AAPL, IBM, CVX, INTC, AMZN and PM.
At this point, the rally from the oversold lows looks vulnerable to profit-taking ("too far, too fast"), but that's not my call. I think that earnings season, which began this week but really picks up next week, will likely provide some more relief - there aren't too many "smoking guns" out there in terms of companies willing to disclose substantially reduced outlooks. Quite simply, the market is priced for negative growth in earnings, but most companies appear to be able to show growth in 2012.
Last year, I was comfortable sharing my "official" year-ahead outlook in early October, but I am going to wait until early November this year given all of the cross-currents. My preliminary view is that the 1500 on the S&P 500 I thought we might get in 2011 may present itself in 2012.
Articles
- 12 Energy Bargains- TradeKing
- Gold Stocks Look Interesting - TradeKing
- Bottom-fishing - Seeking Alpha
Final Words
Thanks again to all who participated in the quarterly conference call earlier this week. I shared replay access information by telephone in a previous email, and I remind anyone who hasn't had a chance to listen that the call has been archived to the website. Just log-in and scroll down to find it. We had some good feedback from subscribers and it's only a twenty minute investment of your time.
As I said on the call, as much as the past few months have been challenging for me, I know that the volatility in the markets has been even more trying for subscribers. That which doesn't kill us makes us stronger! I appreciate your confidence and will continue to invest my best efforts in trying to provide superior returns for subscribers.
Regards,
Alan Brochstein, CFA
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