Stock Market Outlook: Rotation Keeps Investors Active

Brandon Van Zee

The S&P 500 (SPY) flat-lined once again and closed higher by just 0.03%, but there has been significant rotation taking place below the surface during the last few trading sessions.

The Russell 2000 (IWM) has seen money flow into small caps for the last week. As well, many of the high-growth momentum stocks in the NASDAQ Composite have been a source of funds.

All four major U.S. stock market indices continue to have bullish intermediate postures and are trading above their falling 30 day moving averages.

All four charts have a “3 Green Arrows” signal and only the Russell 2000 currently has a bearish 10-40 weekly moving average crossover.

The biggest rotations within the market over the last few sessions can be clearly seen by looking at the market through the lens of its 6 core factors; Value and Dividend Yield factors have surged at the same time that Momentum and Low Volatility factors have dropped significantly.

What’s interesting about that movement is that the rotations of the last few days have been completely opposite from the factors that have led and lagged the market during the full calendar year of 2019.

According to the Sector Selector tool, 28 out of the 29 stocks that hit 52-week lows on the Market Scholars 1000 List last week are up so far this week and many of the stocks that hit 52-week highs last week are down this week.

Get market insights, stock trading ideas, and educational instruction over at the Market Scholars website.

Stock Market Video – September 10, 2019

The rotations can clearly be seen in the sectors this week as well; the once red-hot Utilities, REITs, and Technology sectors have seen selling pressure while the previous laggards of Energy, Financials, and Industrials are being bought.

Utilities are the only sector that currently have a bearish intermediate posture according to the Market Forecast technical indicator.

Much of the rotational movements have coincided with the rebound in interest rates over the past week; the 10 year U.S. Treasury yield closed above its 30 day moving average for the first time since July and ended the day at 1.70%

Our trade application example featured a counter-trend swing trade on Sarepta Therapeutics (SRPT) to play into the turnaround theme that has captured the market’s attention in recent days.

Twitter:  @BrandonVanZee and @Market_Scholars 

Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.