Bull sectors outperform in soft market

The US Indexes were mixed on Tuesday with the Dow lagging, a pattern seen all last week, Strength in the Mag7 post GOOGL Q3s lifted the Nasdaq and S&P. The VIX was flat at 20. The main indexes were; DJIA -0.36%, S&P 500 +0.16% and Nasdaq +0.78% (Mag7 +0.92%). On an equal weighted basis (our measure) the overall market was -0.35% after Mondays strong run. Breadth was weak at 38% (range of 12% to 88% over the last six weeks) volumes were strong at 9.9b (the average daily volume over the last year of 8b). 

One day returns as follows - equal weight basis: Mag7 +0.92% (META +2.6%, GOOGL +1.8%, AMZN +1.3%, MSFT +1.3%, TSLA -1.1%), large cap -0.32%, medium cap, -0.15%, small cap -0.35% and micro cap -0.4%. On a 1 and 2 week equal weight basis respectively; Market +0.0% and +1.2%, Mag7 +3.3% and +4.9%, Large caps -0.4% and -0.4%, Medium cap +0.3% and +0.1%, Small cap +0.2% and +0.4% and finally Micro cap -0.1% and +2.4%. 

Our risk monitor remains in favour of the larger cap stock but Micro has now outperformed the market on both a 1w, 2w and 4w period. Micro caps have outperformed Large cap by 1.2% over the two weeks but have underperformed the market by 18% over the last 12 months.

The sector bias favored the Bull sectors again on Tuesday, with the addition of Financials. Energy was the weakest sector again driven by the oil price softness but Uranium was +1.2%, Renewable Energy & Equipment was -3.6%. Technology was the strongest sector again on Tuesday, helped by strong performance in Fintech +0.5%, Blockchain continues to seesaw and was +2.3% on Monday following Monday's +8.5%, Semicons +0.9%. Healthcare was flat, with Biotech lagging slightly at -0.16%. The sector has outperformed the market over the last 2 weeks by 2%, but has lagged the market over 3 months by 3%. When this sector runs it runs very aggressively (+55% from mid Nov23 to Feb24). Too early to say the is the start of another run but it is worth watching. Basic Materials beat the wider market but was down on the day, Gold +2.1%, Silver +1.4%. Trump Media was a strong performer in Financials.

A notable number of 52 week highs in the following sectors: Consumer Cyclicals (Hotels & Entertaining and Media & Publishing), Financials particularly Banking & Investment Services. Industrials was strong again (across the sector ex Transportation) and Technology (Software & IT Services and Technology Equipment again).

Notable high volumes in: Basic Materials (Metals & Mining), Consumer Cyclicals (across the sector), Industrials (across the sector ex Transportation) and Technology (Software & IT Services again)

Following Tesla's Q3 update (and massive outperformance) all eyes turn to five other Mag7 stocks that announce this week. GOOGL beat on both revenue and profit yesterday, with cloud +35%, this helped push AMZN and ORCL higher on Tuesday. MSFT and META announce today and AMZN and AAPL Thursday. It is worthy of note that the higher risk assets have been materially outperforming - Blockchain, Biotech, Clean Energy and more recently Quantum Computing. Whether the market will shrug off the wider geopolitical concerns is not clear but the oil market has softened as focus turns to the looming oil surplus vs fears of Iran oil field attacks.