Selling Winners, Buying Losers

As shown in the snapshot below from our Trend Analyzer tool, Technology has fallen 4.8% in the first week of the second half (5 trading days), ranking it as the worst performing sector so far this month.

Industrials (XLI) is down the second most at -2.6%, followed by Consumer Discretionary (XLY) at -1.7% and Materials (XLB) at -1.3%.  On the flip side, Consumer Staples (XLP), Communication Services (XLC), Health Care (XLV), Financials (XLF), and Energy (XLE) have all gained more than 1%, led by Energy (XLE) at +4.7%.

July's action has been purely rotational thus far.  There were 22 stocks in the S&P 500 that more than doubled in the first half.  So far in July, these 22 stocks are down an average of 16.3%, with 20 of 22 in the red.  The remaining 478 stocks in the S&P are up an average of 0.9% this month.

As shown below, the six S&P 500 stocks that gained more than 250% in the first half are down at least 10% so far in July for an average drop of 18.3%!

There were 29 S&P 500 stocks that fell 20%+ in the first half, and as shown below, 26 of them are up so far in July for an average gain of 5.3%.  Only one of the 16 worst performing stocks in the first half is down so far in July, and that's Lululemon (LULU) with a small drop of 0.5%.

The six stocks that were more than cut in half in the first half have all bounced at least 3% in the second half, with Accenture (ACN) up the most at 10.2%.

Given the huge performance divergences seen so far in July, it's pretty clear that a lot of the move can be attributed to large investors and ETFs rebalancing their portfolios by selling winners and buying losers.  We wouldn't read too much more into it.