Industrial stocks have been one of the bright lights of the re-opening crowd, with investors focusing on them to potentially signal that the engine of commerce is really steaming.
They suffered a hiccup to start the New Year. After months with an overwhelming majority of industrials holding above their medium-term trends, that dropped quite a bit as the calendar turned. For the first time in nearly 2 months, fewer than 70% of industrial stocks traded above their 50-day moving averages.
The last time the sector enjoyed an extended run with more than 70% of stocks above their 50-days, when it first dropped below 70%, the sector turned immediately and headed higher. Historically, it hasn't been quite so easy.
What else is happening
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- Forward returns when the percentage of industrial stocks above their 50-day averages drops below 70%
- Returns in XLI when Twitter users are optimistic (like now) versus pessimistic
- Corporate insiders aren't buying a lot of shares in industrial companies
- A look at the seasonal window in XLI
- What happens to industrial stocks when the ISM Manufacturing survey rises above 60
- The Russell 2000 fund, IWM, gapped up almost the most-ever when at a new high
- Financials had a big spike versus tech
- What seasonality says about prospects for the British pound
- Returns since 1926 when small-cap stocks see a big jump to a new high
On Wednesday, the Russell 2000 rose more than 3% to an all-time high. Since the index's inception in 1979, the only other day that can claim such a good performance was February 29, 2000.
Sentiment from other perspectives
We don't necessarily agree with everything posted here - some of our work might directly contradict it - but it's often worth knowing what others are watching.
1. Retail traders have gone heavily short the FTSE 100, and they have a pretty good record at actually being correct. [DailyFX]
2. With stocks doing well and neighbors getting rich, it gets harder and harder to justify holding cash, so investors are deciding to hold less of it. [Bloomberg TV]
3. Investors have enjoyed the "celebration" part of the cycle when a new president gets elected, and if history is any kind of a guide then the hangover is about to begin. [Tom McClellan]
The post titled Despite the "reflation trade," fewer Industrials are trending higher was originally published as on SentimenTrader.com on 2021-01-07.
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