Technical Value Scorecard Report For The Week of 12-18-20

The Technical Value Scorecard Report uses 6-technical readings to score and gauge which sectors, factors, indexes, and bond classes are overbought or oversold. We present the data on a relative basis (versus the assets benchmark) and on an absolute stand-alone basis. You can find more detail on the model and the specific tickers below the charts.

Commentary 12-18-20

• On a relative and absolute basis, many of the recent top performers, mainly those in the “reflationary” trade camp, are coming back to earth and toward fair value.
• For the week, Technology and Momentum (MTUM) outperformed the S&P, while Transports, Energy, Industrials, and Value underperformed. Small Caps, continue to stay strong, beating the S&P by 1.27% this past week and nearly 14% over the last 35 trading days.
• Staples and Utilities are again the weakest sectors on a relative basis.
• On an absolute basis, most sectors and indexes remain decently overbought. Utilities buck the trend, trading slightly below fair value. The S&P 500 remains at overbought levels similar to the peaks of late August, mid-April, and just prior to the COVID-related sell-off in March. All three peaks resolved themselves with declines, two of which were greater than 10%.
• The third table compares the sectors and indexes versus their respective moving averages. As shown, Small Caps and Mid Caps are still 2+ Sigmas (Bollinger Bands) above their 200 dma. Interestingly, MTUM is now 2 standard deviations above its 20 and 50 dmas.
• A month ago we shared the “spaghetti” plot comparing each sector’s relative score with its momentum. Today, we share it again with the original circle in place showing where XTN, XLF, XLI, and XLE were trading when we last showed the plot. As shown, those sectors are clearly losing momentum and moving back to fair value. If you recall, we adjusted the y-axis because the momentum levels of those four sectors were simply “off the charts.”

Graphs (Click on the graphs to expand)

Users Guide

The score is a percentage of the maximum/minimum score, as well as on a normalized basis (sigma) for the last 200 trading days. Assets with scores over or under +/-60% and sigmas over or under +/-2 are likely to either consolidate or change trend. When both the score and sigma are above or below those key levels simultaneously, the signal is stronger.

The first set of four graphs below are relative value-based, meaning the technical analysis score and sigma is based on the ratio of the asset to its benchmark. The second set of graphs is computed solely on the price of the asset. Lastly, we present “Sector spaghetti graphs” which compare momentum and our score over time to provide further current and historical indications of strength or weakness. The square at the end of each squiggle is the current reading. The top right corner is the most bullish, while the bottom left corner the most bearish.

The technical value scorecard report is just one of many tools that we use to assess our holdings and decide on potential trades. This report may send a strong buy or sell signal, but we may not take any action if other research and models do not affirm it.

The ETFs used in the model are as follows:

• Staples XLP
• Utilities XLU
• Health Care XLV
• Real Estate XLRE
• Materials XLB
• Industrials XLI
• Communications XLC
• Banking XLF
• Transportation XTN
• Energy XLE
• Discretionary XLY
• S&P 500 SPY
• Value IVE
• Growth IVW
• Small Cap SLY
• Mid Cap MDY
• Momentum MTUM
• Equal Weighted S&P 500 RSP
• NASDAQ QQQ
• Dow Jones DIA
• Emerg. Markets EEM
• Foreign Markets EFA
• IG Corp Bonds LQD
• High Yield Bonds HYG
• Long Tsy Bonds TLT
• Med Term Tsy IEI
• Mortgages MBB
• Inflation TIP