Market Map: A Weekly Review (July 3rd - July 7th, 2023)

Despite a slight dip in the S&P500, the market retains its bullish status. Key changes occurred in the defensive group, while sectors like Technology, Consumer Cyclical, and Communication Services continue to lead.

Market Status

As of the week ending on July 7th, 2023, the market maintains a bullish status. Despite the S&P500 index decreasing by 1.16% (Table 1), the market structure remains largely unchanged. Ten out of eleven sectors exhibit a clear bullish signal (Table 2), up from nine out of ten the previous week.

Sector Performance

Significant changes were observed in the defensive group. The Healthcare sector (XLV) turned bearish, while Consumer Staples (XLP) and Utilities (XLU) turned bullish according to breadth indicators (Table 2). However, the defensive group as a whole remains weak, occupying the lower ranks.

The Technology (XLK), Consumer Cyclical (XLY), and Communication Services (XLC) sectors continue to outperform the S&P500 benchmark (SPY). Despite the Industrial sector (XLI) ranking below SPY according to the SCTR ranking (Table 3), it has retained its bullish status since December 27, 2022, and continues to be in an upward trend.

Trends and Seasonality

The Technology and Consumer Cyclical sectors remain in a solid upward trend, outperforming SPY, and are the preferred groups for forming a long portfolio (Table 3). Both sectors exhibit positive seasonality in July and August.

The Industrial sector (XLI) has changed its direction towards the NorthEast, indicating that the sector is gaining momentum and its trend of relative strength to SPY (Table 3).

Avoiding Certain Sectors

The Energy sector (XLE) has turned fully negative this week (Table 4). This group should be avoided for long positions. Also, note the sector's seasonality, as XLE only outperforms the S&P500 in 32% of observations over the past 20 years in August, and on average, it underperforms the benchmark by 2% (Table 3).

Rotation of Capital

Growth stocks dominate the capital rotation in market groups (Table 5), while value stocks are the outsiders. The Stocks group continues to dominate in asset rotation (Table 6), with Bonds remaining as outsiders. The Real Estate Group has shifted toward the NorthEast (Table 6).

Global Markets

The American stock market remains the leader in capital rotation across global markets (Table 7). The South Korean index ($KOSPI) has lost momentum and almost 5% over the last three weeks, moving into the Weakening quadrant (Table 7).

In conclusion, despite the S&P500 ending the week in the red, it's too early to ring the bear bell. The market remains bullish according to the statistics we gather for the market map (Table 6), and any pause or potential correction in the indices should be used to shake up the portfolio and form new long positions.

This article was prepared by Alex Makarenko, a Strategic Wealth Advisor with over 13 years of experience in the stock market. Alex is a CFA level 1 candidate and has managed approximately $100M AUM, focusing on long-term investments, intraday trading, and private equity opportunities.

Feel free to reach out for advisory portfolio management services, including long-term investments, intraday U.S. stock strategies, and early-stage private equity investing.

Contact us: +358 465602261

E-mail me: [email protected]

Stay tuned for more updates, and don't hesitate to reach out with any questions or for further information.

Disclaimer: This article is intended for informational purposes only and should not be construed as professional investment advice. Investments in securities involve the risk of loss. Past performance is no guarantee of future returns. Individual investment results may vary, and investment in any strategy mentioned herein may not be suitable for every investor. Always consult with a qualified financial professional before making any investment decisions.

The information provided in this article is based on the data available at the time of publication and the author's interpretation of that data. While every effort has been made to ensure the accuracy of the information, it may contain errors or omissions, for which the author and the publisher cannot be held liable.