E Weekly Investment Report

Top scoring weekly returns:  Buy and Hold 1 Year

  • Utilities score best across our universe
  • Friday's weakness was in line with historical April trading trends


Last week we saw sector bunching around the average universe score, which is typical at inflection points. Scores have rolled to reflect the shift to Q2 seasonality, so watch sector and industry ranks closely over the coming weeks.
 
Heading into the week, utilities is the only sector scoring above average. Typically, utilities provide upside ahead of the summer peak demand season.
 
Consumer, industrials, and healthcare all score in line with the average universe score. Basics, financials, technology and services score below average.



The following chart breaks out score by market cap and sector. 

This next chart shows historical four, eight, and 12 week moving average scores. Historically, when the four week (blue line) is below the eight and 12 week moving average, risk reward isn't in your favor. Watch and wait for the line to move back above for maximum conviction.

This next chart shows April's historical trading pattern. It reflects the average return on each trading day of the month over the past 10 years. Historically, the first half of the month has been less rewarding as positions are locked in to pay taxes.  Five of the eight worst trading days of the month are in the first 10 trading days.

Utilities

The only sector to score above average this week is utilities. Utilities began perking up in our ranking in mid March when the average score for the group moved above the average universe score. The basket's strength coincides with typical Q2 shoulder month seasonal strength ahead of summer peak demand. The following chart shows average relative returns for the XLU by month. Over the last decade, average utilities returns have outpaced the SPX in every month of the second quarter.  Higher natural gas prices tied to inventory de-stocking supports spot electricity prices.

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