Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
Unlike the smooth sailing of January and early February the last month has been a lot more choppy. We had the break of channel in February as safety sectors took over market leadership, then a complete reversal of that in the first half of March as the channel was regained and cyclical sectors took back the lead. The past week or two has been even more choppy as news flow is pushing the indexes around substantially. Yesterday the market gapped up and nearly touched year highs, today the market gapped down and erased all of yesterday’s gap up. It certainly is harder to find ideas that work for more than a day or two as well.
We are currently back out of this channel but just barely. In theory yesterday’s blast up failed to create a new high, so if that “was it” we can always look back and say that was the lack of the high that marked an important reversal. Otherwise this is some chop as we wait for the next move. Sector strength is quite mixed – we did see strength even during yesterday’s rally in utilities and consumer staples but we also had housing and other cyclical areas were ok if not making new highs. This contrasts to February where it was all safety sectors for a 10 day period leading the charge. Definitely very murky here. S&P 1548 has been a battleground the past few weeks, marked in blue below. (current low 1548.41 today) In between the bottom of this channel (orange) and the light blue “line in the sand” a yellow caution light is raised. Below that light blue line and things could make a significant turn.
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Any securities mentioned on this page are not held by the author in his personal portfolio. Securities mentioned may or may not be held by the author in the mutual fund he manages, the Paladin Long Short Fund (PALFX). For a list of the aforementioned fund’s holdings at the end of the prior quarter, visit the Paladin Funds website at http://www.paladinfunds.com/holdings/blog
