Weekend Review and Watchlist

Overview

The S&P 500, Dow, NASDAQ, NYSE Composite, and Midcap Index, all closed at all time highs. Seven of the ten S&P Sector SPDRs are at all time highs. Breadth is at all time highs. Bullish sentiment remains below average.

Here's the S&P, NASDAQ, and Dow on a weekly:-

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I'm sure if someone looks hard enough, changes the timeframe, maybe switches the chart to be in Thai Baht or Turkish Lira and squints a little, they will find some minor divergence or elaborate way to portray this week's price action as negative. I have seen several try.

The good ol' 1929 and 1987 analogs did the rounds this week (just align the current date with the day before the crash, alter the price axis until it fits, and tilt your head slightly), along with DeMark signals, and perma-bear pundits who have been wrong for at least 5 years and 70%. Price is destroying their narratives and credibility on a daily basis.

For a start it's not just a handful of names that are responsible for all the gains. Here's the S&P equal-weight ETF:-

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Breadth is at all time highs, shown here via the NYSE Cumulative Advance/Decline:-

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Some people don't like that that includes bonds and ETFs. Here's breadth for the S&P 500 only:-

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Bullish Sentiment via AAII actually fell this week -5.9 to 26.9%, while Neutral is as high as 41.5%, and Bearish 31.5%. The AAII survey isn't everyone's favorite measure of sentiment, but it's one I consistently share, which I figure is better than switching to whichever one fits your current position or narrative.

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Sector Rankings

Seven of the ten S&P Sector SPDRs are at all time highs.

Consumer Staples, Utilities, Consumer Discretionary, Tech, Healthcare, Industrials, and Materials.

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Next comes Real Estate, which is above its 20, 50, and 200-day MAs, but below its highs.

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At the bottom are Financials - above its 200-day but below its 20 and 50, and Energy - below all its MAs and close to 52-wk lows.

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Alpha Capture Portfolio

Our model portfolio climbed +1.2% this week vs +1.0% for the S&P.

It's +6.6% YTD vs +8.9% for the S&P and remains long 10 names, with total open risk of 8.6% and around 10% cash.

As an interesting aside, and to demonstrate the distribution of returns in highly-concentrated portfolios, my client accounts which follow a very similar strategy are currently up around 12% YTD net of fees. The difference? Stock selection / portfolio construction. It's a major variable that can obviously make a huge difference in a highly concentrated portfolio. In this case it is more or less all because of one name which those accounts have but this portfolio doesn't. But it works both ways. In 2015 this portfolio finished with a small gain, but my client accounts were down double-digits.

The point is, if you want to perform like the index then buy the index. The more names you have in a portfolio the more closely your performance will mirror an index. The fewer names you have, the 'lumpier' your returns will be, for better or worse. I communicate the return on a consistent basis, but it's really the process that should be your daily focus, not the swings in the P&L.

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Watchlist

With the strength and breadth of the market at the moment there are literally hundreds of stocks at new highs. We have names from all the major sectors, but the two that feature most strongly this week are Healthcare and Consumer Discretionary.

Here's a sample from the full list of 24 names:-

$CERN

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$IDXX

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$VRTX

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$MKSI

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$FDX

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$EBAY

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$PLAY

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$DRI

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Posted to Alpha Capture on Jun 02, 2017 — 10:06 PM

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