Our underweights are XLE and XLB. The reason for the underweight in XLE is that the sector has one of the weakest Accumulation Models and has weakened. XLE has broken support and still has no buy indication. XLB has broken the December 2018 low, and the accumulation model has weakened.
SPY has continued the 2019 rally into January 2020, per our forecast. Breadth indicators have improved, but sentiment remains a concern. Small Cap has moved above the key 82 area on IJR, and there is an accumulation model buy signal on Transports. Our major trend system is positive at 3/1, with Small Cap being the only negative index.
Our overweights are still XLF and XLRE. These are both strong Accumulation Models. If we are making a mistake it is that XLRE is too defensive but both XLRE and its Accumulation Model have continued to hit new highs.
We still have concerns that Small Cap and the Transports are lagging, but there are signs this will improve in the second part of 2019. Our major trend system remains neutral.
SPY has tested the upper end of our projected high range for 2019. Breadth indicators are overbought, and sentiment remains a concern. The market has corrected and bounced back.
IYZ traded through 30, finally, but is below that area once again. This may not get going right away, although Accumulation Models have improved. This sector may have bottomed, but there looks to be less upside potential than in other sectors.
XLRE has held the break out and the Accumulation Model has hit new highs. The reason for the Under Weight in XLE is that the sector has one of the weakest Accumulation Models and is at resistance as oil moves into a seasonally weak timeframe.
SPY tested the 240-area, where we got slight buy signals. This rally has relieved the oversold and provided a breadth surge. New Highs/New Lows has improved, but sentiment remains a concern and the odds of a retest are higher than most think.
Our Over Weights are now XLF and XLV. These are both strong accumulation models. XLF is now stronger than XLI, our previous overweight, and it has recovered well from the break of 25-area support.
SPY hit the bottom end of our target range at 290. Now, the forecasted pullback and retest are still underway. Last month we thought this was ending, but it has continued, and until %Bears and New Highs/New Lows improve we will remain defensive.
Our Over Weights are now XLI and XLV. These are both strong accumulation models, and XLI is a reasonably strong chart. XLV is turning into a market leader.
