Good morning,
I’m quickly running out of ways to start this intro without beginning “It was another wild week for stocks”, but ya know, it was.
The rotation trade further resembled an auditorium fire last week, with investors running for the exits in software stocks, and flooding into anything else, but especially energy and defensives.
Importantly, cyclicals were also a recipient of flows, a dynamic that needs to continue if the major indexes are going to stay afloat.
However, the combination of extreme oversold conditions in tech and software, and broadening breadth came to a head on Friday and resulted in one of the best single-day performances we’ve seen in months, with the S&P 500 gaining 2% (its best day since May) and NYSE breadth posting the strongest advance-decline ratio since August.
Today’s report will look at just how likely a continuation of that strength is, and will break down:
Groups leading the breakout
Laggards and tradable bounces in tech and software
Risk ratios and breadth
Sector seasonality
Major indexes and key sectors to watch
The bond bear case
and more!
