The WOTE Quant: September 2, 2024

Beware the 1999-2000 SPX topping process analog.

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Discussion

Today’s WOTE Quant analyzes the relative strength trends of the three SPX sector groups (NDX, Cyclical, Defensive), key macro pairs, and MAG7 versus LAG493, generating the following conclusions:

1. Underweight Tech is a likely source of alpha looking out 3-9 months.

2. Outside of Tech, Industrials and Financials look reasonably attractive, but emerging relative strength from Utilities and Health Care calls into question the durability of that attractiveness.

3. The “guts of the stock market” - as represented by Transports vs. Utilities, Discretionary vs. Staples (equal weight), and Banks vs. Utilities - decisively point toward on-going choppy economic and financial market waters.

4. Expanding breadth, while bullish on the surface - especially if the Fed cuts aggressively enough to reaccelerate the economy - needs to be viewed with caution, as the 1999-2000 SPX topping process looks like an eerily prescient historical analog.

Analysis