Changing Of The Guard - Sunday, September 20

US equity markets mostly retreated, led by the Nasdaq 100 which was down -1.32% for the week. The major theme is that rotation is occurring across all asset classes with new leadership appearing. Making up for lost ground, Small Caps rallied with Grandpa Russell (IWM) closing up +2.78% for the week on improving volume.

Value stocks (VTV) which have been lagging Growth stocks (VUG) for over a decade, confirmed a breakout on a short-term basis. Transports (IYT) have taken over sector leadership with the strongest TSI (Marketgauge’ s Trend Strength Indicator) on excellent volume

This week’s highlights are:

  • Risk Gauges remained negative
  • Nasdaq 100 weakness was confirmed by seven distribution days over the past two weeks along with two consecutive weekly closes under its 50 DMA
  • Market Internals are mixed
  • Soft commodities broke out of a long-term base
  • Value stocks (VTV) along with Big Caps (DIA) had good relative strength to growth stocks (VUG)
  • The oversold energy complex rallied

Further confirming some serious rotation is the move out of growth stocks to foreign equities and commodities of all sorts. The strength in commodities should be making the Fed happy as inflation is certainly in the air along with the virus.

With the US election just six weeks away, a virus running amok, political tension dividing the country, and a Supreme Court justice seat up for grabs, US equity markets are likely to stay under pressure.

Last week we held a training webinar for our Alpha Rotation Model which has and impressive track record of determining when it’s time to be in stocks, bonds, or cash. Currently it agrees that cash is king. If you’d like to see why, the replay is available here for a limited time.


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