Weekly Rotation Rundown

Come see where the money is flowing...

It’s been a pretty eventful week with MAG 7 earnings kicking off and precious metals going crazy. FOMC was basically a dud and the results were clearly telegraphed but Trump is making it clear that he wants lower rates.

Rotation into tech is clearly starting to take shape as the QQQ’s have led the way this week. XLK popping it’s head up on the relative rotation graph is a good sign that more rotation into tech is headed our way.

.The Communications sector (XLC), along with Utilities (XLU) remain the only sectors lagging. XLY worked it’s way out of lagging this week. Tech remains the only sector weakening, but there are clear signs of recovery happening there.

Last week I expected XLK and XLU to begin a move and that’s exactly what we got.

XLU has been in a clear downtrend since mid-October, you notice we had a failed breakout earlier this month and finally this week we have a clear break of the trendline. Other sectors recently have broken these trends with a fury and I’m excited to see if that happens with Utilities as well.

XLK coming from a weakening position has a very good chance of making a strong move as well. The party has already started, as you can see in the chart.

Clear breakout and some daily gapping right on cue. Relative to the other sectors, XLK has some ground to make up, and we all know that once tech starts catching a bid things can really move fast. MSFT gapping down on earnings has me a bit suspicious about the overall health of the market and MAG 7’s ability to fuel another run up. On the other hand all bearish sentiment has been getting invalidated repeatedly, so it’s hard for me to take a stance there. If I had to chose right now I would say XLK to highs sounds pretty likely. Earnings and price action will tell the story over the next couple of weeks.

Also watch XLC and XLY as AAPL and AMZN report earnings. These reports and the reaction afterward could determine the direction these sectors head over the next few weeks/months and they are clearly moving now.

Also XLE (Energy) is breaking away on rising crude prices. The names in the sector have been extremely suppressed so this breakout could have some extensive upside if crude continues to rise and doesn’t get stuffed back down.

Any questions? Feel free to ask me