Sell-Side Sentiment Weakened Last Week
Although it was a great week for the market, sell-side sentiment took a hit last week. Five industry groups were down 1% or more, three were about flat, and only two managed a substantive gain. Nevertheless, sell-side sentiment remains strongly on the positive side.
The impact of the bad weather last month on the Friday employment data was hard to discern, but the results were good enough to allow the market to continue its rise. Also helping last week was better than expected store sales from most of the retailers. It is still not clear whether the trends in employment, consumer spending, or housing are strong enough to justify further increases in the market indexes, but worries about a double-dip recession appear to be behind us.
The market is now pushing the upper end of its trading range of 1,050 to 1,150 for the S&P 500, ending the week at 1,139. The NASDAQ is now at an 18-month high. The near-term market outlook depends mainly on a discernable upturn of substance in employment.
The Stars in Sell-Side Sentiment Bear Watching
Over the last month or so, short-term and longer-term trends in sell-side sentiment have been strongest in the Technology and Consumer Services industries. Last week, sentiment for Consumer Services fell by 4%, while Tech sentiment dropped 2%. Consumer Services is right at the bottom of its upward channel, and another week or two of declines could reverse both the short and long-term trends. The situation in Tech is still positive. The decline last week only dropped sentiment to the middle of the upward channel for Tech. Prices in both industries were up last week, but only in line with the overall market.
Potential Upside Breakouts for Industrials and Telecomm Remain Intact
Last week, we indicated that Industrials and Telecommunications were poised for upside breakouts. Sell-side sentiment for Industrials was flat and Telecomm was only up 1%. The possibility of an upside breakout remains for both, although Telecomm sentiment may be starting to roll over indicating that the upward trend may have only been a dead cat bounce that followed a very steep and sharp downdraft.
Sell-side sentiment for Health Care has been rising for the last few weeks, with a 2% gain last week. This industry now is moving into territory where an upside breakout is also possible. Price moves the last few weeks have also been up for the industry but not as strongly as sentiment.
It looks like the up-and-comers could be shifting from Industrials and Telecomm to Industrials and Health Care.
Boost in Sentiment Provides Some Hope for the Financial Industry
Sell-side sentiment for the Financials bounced up 4% last week, putting sentiment at the upward side of its strongly downward channel of the last four months. The next two weeks could be critical in determining if sentiment can generate a meaningful rebound or whether it continues downward. Prices for Financials nudged up last week, but still are about in the middle of the flat six-month channel.
Stocks to Watch
Over the last week, the following stocks had the largest bullish and bearish sentiment shifts amongst the sell-side.
Bullish:
Symbol | Company | Industry | Exchange |
Citigroup Ord Shs | Financials | NYSE | |
Humana Ord Shs | Health Care | NYSE | |
Sykes Enterprises Ord Shs | Industrials | NASDAQ | |
RIMM | Research In Motion Ord Shs | Technology | TSX |
Centamin Egypt Ord Shs | Basic Materials | TSX |
Bearish:
Symbol | Company | Industry | Exchange |
Sigma Designs Ord Shs | Technology | NASDAQ | |
Continental Airlines Ord Shs Class B | Consumer Services | NYSE | |
Safeway Ord Shs | Consumer Services | NYSE | |
Freeport McMoRan Copper & Gold Ord Shs | Basic Materials | NYSE | |
IMG | Iamgold Ord Shs | Basic Materials | TSX |
Until next week …
Disclosure: No positions
