Tracking the Shifting Sands of the Market

Today marks the end of the first full week of December. Let’s review the winners and losers with an eye towards sussing out near-term market trends.

We are looking for changes in trend, with the idea of staying ahead of the curve.

Winners – 1 week

Short Volatility. Up 8.26%
India. Up 2.16%
Financials. Up 1.56%
EAFE. Up 1.01%
Japan. Up 0.95%

Losers – 1 week

Long Volatility. Down 7.61%
Junior Gold Miners. Down 4.47%
Energy E&P. Down 3.24%
Small Cap U.S. Stocks. Down 1.05%
Utility Stocks. Down 0.96%

You can’t tell much about trends by looking at one week of data, but sometimes you can find surprises. Here’s what I see in the 1 week numbers: The market got quieter, foreign markets outperformed U.S. markets, U.S. financials were hot, gold was not, and small caps lost ground to big caps.

Winners – 1 month

Short Volatility. Up 11.1%
Regional Banks. Up 8.89%
Home Construction. Up 7.05%
Small Cap U.S. Stocks. Up 3.23%
Large Cap U.S. Stocks. Up 2.83%

Losers – 1 month

Long Volatility. Down 10.79%
Junior Gold Miners. Down 6.96%
Russia. Down 3.71%
Energy E&P. Down 3.69%
China. Down 2.71%

What’s going on?

We now have the beginning of a theme. The market is becoming less volatile; financials, home builders, and small caps are leading the market; gold and oil are struggling a bit; Russia and China are also struggling.

This is how you develop your themes as an investor. You look for trends, and trend reversals. Then you adjust your asset allocation accordingly. Today we only covered 1-week and 1-month trends, but that’s enough to get a sense of very short-term trends.

Next time, we’ll look at 3-month and 1-year trends. That will help us expand our horizon and perhaps identify trends that are possible investment opportunities.



About the Author

Former head of equity trading, Northern Trust Bank, Chicago. Teacher, trainer, mentor, market historian, and perpetual student of all things related to the stock market and excellence in investing.

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