BITO - The 1-Minute Market Report August 19 2023

2023-08-21 06:45:00 ET

Summary

• After making a new 2023 high on July 31, the market is now in the process of consolidating its gains and expanding its participation.
• The best performer last week was Volatility, as investors looked for ways to protect their gains from further downside in the market.
• The S&P 500 was down 2.1% last week. I have been expecting a pullback of 5-7%, which has now begun.

Originally posted on August 19, 2023

In this weekly outlook, I examine the asset classes, sectors, equity groups, ETFs, and individual stocks that are leading the market higher, and which market segments are lagging behind.

By keeping an eye on the leaders and laggards, we can get a sense of where the big money is going, and where it's coming from. Signs that market participation is broadening out are continuing to show up in the data. As this trend continues, it is improving the durability of the rally.

The S&P 500 pullback continues

After making a new 2023 high on July 31, the market is now in the process of consolidating its gains and expanding its participation. For the week, the S&P 500 was down 2.1%.

A look at monthly returns

This chart shows the monthly returns for the past year. The August pullback has erased all of the July gains. It looks like we're getting the 5%-7% decline I have been expecting.

The bull market dips below the trend line

This chart highlights the 22.2% gain in the S&P 500 from the October 2022 low through Friday's close. The index is now 8.9% below its record-high close on January 3, 2022.

The Golden Cross

The market entered a Golden Cross configuration (a Golden Cross occurs when the 50-day moving average crosses above the 200-day) on February 2, 2023.

The spread between these two moving averages is widening. Today, it stands at 7.9%, more than three times as wide as the long-term average of 2.3%. This widespread is one of the reasons I'm expecting a pullback of 5-7% for the S&P 500.

Major asset class performance

Here is a look at the performance of the major asset classes, sorted by last week's returns. I also included the year-to-date returns as well as the returns since the October 12, 2022 low for additional context.

The best performer last week was Volatility, as investors looked for ways to protect their gains from further downside in the market.

The worst-performing asset class last week was Blockchain, which gave up 9.6%. This asset class is highly correlated with Bitcoin and other cryptocurrencies, which came under heavy selling pressure last week.

Equity sector performance

For this report, I use the expanded sectors as published by Zacks. They use 16 sectors rather than the standard 11. This gives us added granularity as we survey the winners and losers.

All 16 sectors were down for the week, but Energy stocks held up the best.

Construction was the hardest hit, losing 4.33% for the week.

Equity group performance

For the groups, I separate the stocks in the S&P 1500 Composite Index by shared characteristics like growth, value, size, cyclical, defensive, and domestic vs. foreign.

All of the equity groups were down last week. Large cap growth held up the best.

The worst-performing group was Small cap value, which lost 3.54%.

The S&P Top 7

Here is a look at the seven mega-cap stocks that have been leading the market all year. Nvidia ( NVDA ) was the only winner in this group, up 6% for the week.

Tesla ( TSLA ) was the biggest loser, down 11.2%.

The 10 best-performing ETFs from last week

Carbon Credits captured two of the ten spots on the ETF leaderboard last week. Bonds captured 3 spots as investors rotated away from equities and sought the relative safety that bonds provide.

The 10 worst-performing ETFs from last week

Bitcoin ( USD ) had a tough week, sending the Bitcoin ETF down 11.6%. Solar energy continues to struggle this year as high interest rates are making it more expensive for consumers.

The 10 best-performing stocks from last week

Here are the 10 best-performing stocks in the S&P 1500 last week.

U.S. Steel ( X ) received a surprise $7.8 billion bid from James Bouchard. Carlson Capital, a Dallas-based hedge fund, acquired a significant stake in GLT.

The 10 worst-performing stocks from last week

Here are the 10 worst-performing stocks in the S&P 1500 last week.

Hawaiian Electric ( HE ) cratered due to investor concerns about their culpability for the wildfires in Hawaii.

Final thoughts

The S&P 500 was down 2.1% last week. I have been expecting a pullback of 5-7%, which has now begun. I see this as a positive development since it will wring some of the froth out of the market and allow earnings to catch up with prices. As long as small caps, mid caps, and value stocks continue to outperform the S&P Top 7 mega-caps, I think a 5-7% pullback would improve the sustainability of this bull market.

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Original Post

Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.

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