Weekly Street Sentiment: "Abi Gezunt"

Includes: DIA, QQQ, SPY
by: First Coverage

Weekly Street Sentiment

  • Overall market sentiment declines by 3.91% .
  • Most bearish industry reverts back to Financials, unseating Consumer Cyclicals.
  • Most bullish industry is now Healthcare unseating Energy.
  • Sell-side certainty remains positive but declines for third week in a row.
  • Most active area for idea generation is Energy.
  • Transports continue to lose both interest and bullish sentiment.

Weekly Commentary

Overall market sentiment declines 3.9% week over week heading into Monday morning.

Last week, sell-side professionals correctly called Energy to rally, Financials to be strong and the market to rise. Looking ahead to this week the institutional sell-side is looking for a decline in overall markets and has gravitated to Health Care as their most bullish Industry for the first time. Second most bullish sentiment remains with perennial favorite Energy, although slightly down from last week’s record levels. Financials have fallen out of favor once again and managed to unseat Consumer Cyclicals as the industry with the most bearish sentiment heading into Monday’s open.

Looking Ahead

In traditional times of strife there’s an old Yiddish saying which the sell side appears to be finding comfort in this week: “Abi Gezunt”. Roughly translated, it means ‘As long as you have your health’, and this past week, Healthcare is exactly what the sell side was longing to have.

Two weeks ago we mentioned that Healthcare was gaining in bullish sentiment. Since that date, it’d be safe to say that it took the express elevator to the top passing much more likely contenders including Energy, Basic Materials and Technology along the way. While one could easily dismiss this rise as a blip and move on, one would be doing so at their own peril. The same group responsible for this call re: Healthcare has now also correctly called overall market direction every single week since we’ve started publishing aggregated sentiment.

So, for those of you looking to do a little more digging before dismissing, we’ll help you get started with a few unrelated yet interesting facts:

    1. Healthcare has been the worst performing industry in the market over the last 3 months but has managed to hold its ground and stem declines over the last month.
      1. The perception amongst many investors is that most small and mid-cap Healthcare stocks are always looking for capital.
      2. Healthcare is the new number one industry for job postings on some of the more active hiring web sites.

      Perhaps those on the sell side of the street are speculating that credit markets might not shut their doors as tightly as others had been anticipating. If that’s the case, an early rotation back into healthcare, where cash will now be accessible to replenish all those company’s coffers, would be an idea they might start advocating to their buy-side clients. As always we’ll watch and see how it unfolds.

      The consumer gets a much-needed break from being our whipping boy this week as Financials are once again the market’s most bearish industry. Citi and Merrill combined for first quarter losses of over $7 Billion and write-offs topping $20 billion and, oddly enough, these numbers seemed to comfort many in the market. (Although I’m fairly certain none of the 10,000 plus announced layoffs were feeling all that comforted). The mantra of ‘it could have been worse’ was overheard many times as justification for rallies in the Financial industry. However, everything being relative, this same data was enough to convince sell-side users of First Coverage that what investors had been standing on for the last two weeks in the Financial Sector was not in fact the ‘bottom’ but a ledge that was crumbling beneath their feet.

      Last week was the second time the sell-side positioned themselves profitably for a rally by Financials, we’ll now watch to see if they are turning negative at the right time as well.

      Previous Sentiment Indicated...

      On April 14th: Energy came racing back to reclaim the title of ‘most bullish’. Not only is it back, but it’s back at record levels of positive sentiment.

      What’s happened since: Oil hits record levels and Energy rallies over 6% as a sector to lead the market in performance.

      On April 14th: Financials put together back-to-back weeks of improving sentiment for the first time since we’ve been publishing aggregated data.

      What’s happened since: A rally in Financials over the past week led to an almost 5% gain.

      Until Next Week…