A broad breakout in recovery stocks

Earlier this week, financial stocks enjoyed a broad breakout, with nearly 30% of stocks in the sector breaking out to at least a 52-week high.

It's only gotten better from there. And they've been joined by a bunch of recovery-sector buddies, too.

Among all indexes and sectors, the four horsemen of a recovery - Energy, Financials, Industrials, and Materials - are leading the charge. At least 30% of member stocks in all four of those sectors reached a new high on Wednesday. That's among the most impressive breakouts in 70 years for sectors geared to an economic recovery.

Energy financial industrial material stocks at 52 week high

When we look at other times when there was such a coordinated breakout among these sectors, we see that often it was too much of a good thing, at least for a while. And it impacted Industrial and Material stocks much more than the other two.

What else we're looking at

  • Full returns in the S&P 500 and sectors when there is a big breakout in "recovery" stocks
  • What happens when TLT gets oversold
  • A close look at the "bubble" in the VIX fear gauge
  • A seasonal look at consumer discretionary stocks
  • The Composite Confirmation Model has turned positive - what that suggests for the next 3 months

Stat Box

More than 50% of financial stocks hit a 52-week high this week. That has happened on 18 other days in the past 20 years, leading to an average 1-month return of -0.33% according to our Backtest Engine.

Sentiment from other perspectives

Some crazy moves. The bond market suffered a mini-breakdown on Thursday, and it was enough to trigger one of the largest drawdowns from a peak in the history of TLT, the go-to bond ETF for many investors. Source: Ycharts via Daily Shot

tlt drawdown

Thanks, inflation. The bond market gyrations are due to a sudden spike in concern about inflation. But it's only in the shorter-term, with longer-term worries about inflation still on the back burner. Source: Wall Street Journal

inflation expectations

Even bitcoin's getting weird. The recent bout of volatility was enough to push GBTC, the go-to bitcoin fund, to a discount relative to its underlying assets. The fund hasn't given investors the chance to buy the coin at a discount in 4 years. Source: Bloomberg

gbtc discount

The post titled A broad breakout in recovery stocks was originally published as on SentimenTrader.com on 2021-02-26.

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