The SPX Sector Report: January 18, 2024
Where we could be wrong in our emphasis on Tech.
We have a jammed schedule this week and wanted to get the January 17 report out last night ahead of WOTE US 60 changes today. What we didn’t have time to delve into is where we could be wrong in our thesis that one should ride the best relative strength trends currently in place (i.e. the NDX Group) and no longer play contrarian with a large active share bet on weak relative strength trends that could reverse in the event of an offensive FED pivot (i.e. the Cyclicals Group) or recession (i.e. the Defensives Group).
Our #1 concern is the lack of confirmation from the small cap (SC) growth/value pair. This macro pair has languished while the large cap (LC) growth/value pair is quickly approaching prior highs. Most recently, this divergence foreshadowed a sharp decline in LC growth/value from late 2021 into late 2022.