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Is The Market Attempting A Notable Shift?

CAMS Weekly View from the Corner – Week Ending 6/16/17

June 19, 2017

Tech stocks – the darling sector of the last three months – have abruptly turned sour and are leading to the downside.  This is a notable development in light of their overwhelming leadership for the market of late.  The market had become very narrow in its leadership which is to say only a couple of handfuls of stocks had predominantly led the charge.

With the quick and notable drawdown in the Tech sector the focus now is to see if the market is attempting to rotate to new leadership.  Importantly, relative to this rotation watch, history provides that rotations from old leaders to new leaders rarely occur without some period of volatility.  This volatility can range from general market indices going lower to simply chopping around for a period of time – hence our focus on this early onset loss of Tech leadership.

Click for Larger View:

The above picture displays the recent three month performance of the S&P 500 via the green line, the Dow Jones Industrial’s with the blue line and the Dow Jones Technology Sector with the red line.  As depicted, from mid-April the Tech sector became THE game in town if you will.

The vertical black line denotes the beginning of June and it is here where we have seen some notable change.  As the Tech sector has lost half of its gain we see the S&P 500 (green line) has gone sideways while the Dow Jones Industrial’s (blue line) is attempting to trend upward.  This is notable behavior relative to the others which is why we are now watching to see if there will be an attempt at new leadership.

Important to this Dow Jones Industrial observation is the fact that it too has a relatively small number of stocks within its index while the much larger S&P 500 is trading sideways in the above depiction.  The point here is if the above process continues the market would then continue its narrow leadership which may again leave it vulnerable to rapid price downdrafts as the Tech index above displays.

All told, we are watching these early identifiers closely to see if rotation will occur and if it does if it can take place smoothly or if it will be a rougher ride via unexpected volatility.

I wish you well…


Ken Reinhart

Director, Market Research & Portfolio Analysis

Portfolio Manager, CAMS Spectrum Portfolio


H&UP’s is a quick summation of a rating system for SPX9 (abbreviation encompassing 9 Sectors of the S&P 500 with 107 sub-groups within those 9 sectors) that quickly references the percentage that is deemed healthy and higher (H&UP).  This comes from the proprietary “V-NN” ranking system that is composed of 4 ratings which are “V-H-N-or NN”.  A “V” or an “H” is a positive or constructive rank for said sector or sub-group within the sectors.

This commentary is presented only to provide perspectives on investment strategies and opportunities. The material contains opinions of the author, which are subject to markets change without notice. Statements concerning financial market trends are based on current market conditions which fluctuate. References to specific securities and issuers are for descriptive purposes only and are not intended to be, and should not be interpreted as, recommendations to purchase or sell such securities. There is no guarantee that any investment strategy will work under all market conditions. Each investor should evaluate their ability to invest for the long-term, especially during periods of downturn in the market. PERFORMANCE IS NOT GUARANTEED AND LOSSES CAN OCCUR WITH ANY INVESTMENT STRATEGY.

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