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Market Lab Report - After the Open 11/11/16

Major averages closed mixed on massive volume once again. There was a pronounced divergence between the Dow Industrials and Russell 2000, both which were up strongly, compared to the NASDAQ-100 which was down strongly. Divergences of such magnitude are very rare but expressive of the institutional footprint due to the huge volumes.

The strength in the small cap Russell 2000 is partly due to its 18.3% exposure to financials, though is also suggestive of a risk-on stance as its next largest sector exposures are information technology at 17.5%, industrials at 14.5%, health care at 13.1%, and consumer discretionary at 12.5% rounding out the sectors with a greater than 10% weighting.

Strength in the Dow along with the steepening yield curve suggests a stronger economy ahead. Weakness in the NASDAQ-100 may be due to capital, which was parked in big cap technology names for performance safety, can now spread out into other sectors that look promising. Alternatively, some voiced concerns that Trump's anti-trust stance on companies such as AMZN is potentially troublesome. Indeed, Trump is likely to put some focus on tech juggernauts who may be in violation as he has already named AMZN.

Apart from techs, emerging markets are taking it on the chin due to fears about how Trump will act on global trade. But also, the prospect of higher U.S. interest rates is boosting the dollar while hitting far-flung currencies.

Hedge-fund titan Stanley Druckenmiller sold his gold and now appears to be on the bull-market train, on the belief that stimulus efforts by global central banks are coming to an end with the US Federal Reserve on the verge of hiking rates again. “Interest rates have been like a beach ball being held underwater by central banks,” Druckenmiller said. Druckenmiller has been vocal against monetary policy. “Monetary policy…caused a massive reallocation of wealth from the middle class to people like me,” Druckenmiller said.

Watch your stocks. So far, only one name has emerged in recent history as actionable, but only on constructive weakness. Meanwhile, the short side has been profitable. Letting your stocks tell you what to do is always key. So far, they are telegraphing caution, though when it comes to markets, things can change on a dime, so stay nimble and at the ready.

Power and telecommunications infrastructure company AGX had a second pocket pivot. While massive rip tides have engulfed the market over the last 2 days, AGX is a beneficiary of President elect Trump's plans for infrastructure development. Pretax margin 18.3%, earnings and sales are accelerating, group rank 20. Buying pocket pivots on constructive pullbacks, if you're going to put any capital at risk in this environment, is highly advised so you're minimizing your risk.

This information is provided by MoKa Investors, LLC DBA Virtue of Selfish Investing (VoSI) is issued solely for informational purposes and does not constitute an offer to sell or a solicitation of an offer to buy securities. Information contained herein is based on sources which we believe to be reliable but is not guaranteed by us as being accurate and does not purport to be a complete statement or summary of available data. VoSI reports are intended to alert VoSI members to technical developments in certain securities that may or may not be actionable, only, and are not intended as recommendations. Past performance is not a guarantee, nor is it necessarily indicative, of future results. Opinions expressed herein are statements of our judgment as of the publication date and are subject to change without notice. Entities including but not limited to VoSI, its members, officers, directors, employees, customers, agents, and affiliates may have a position, long or short, in the securities referred to herein, and/or other related securities, and may increase or decrease such position or take a contra position. Additional information is available upon written request. This publication is for clients of Virtue of Selfish Investing. Reproduction without written permission is strictly prohibited and will be prosecuted to the full extent of the law. ©2024 MoKa Investors, LLC DBA Virtue of Selfish Investing. All rights reserved.
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