Scott Martindale  by Scott Martindale
  President & CEO, Sabrient Systems LLC

Quick assessment:  We have an historic pandemic wreaking havoc upon the global economy, with many US states reversing their reopenings. We just got the worst ever quarterly GDP growth number, and jobless claims are resurging. The Federal Reserve is frantically printing money at breakneck pace to keep our government solvent, with M3 money supply growth having gone parabolic. We have a highly contentious presidential election that many consider to be the most consequential of our lifetimes. There is unyielding and unappeasable social unrest, with nightly rioting in the streets in many of our major cities. Tensions with China are again on the rise, with a new Cold War seemingly at hand. Hurricanes are threatening severe damage in states that are already reeling from a surge in COVID hospitalizations. And yet the Nasdaq 100 (QQQ) has burst out to new highs while the S&P 500 (SPY) is within 3% of its all-time high (although, quite notably, both of these cap-weighted indexes are dominated by a handful of mega-cap, disruptive juggernauts).

Of course, stocks have been bolstered by unprecedented congressional fiscal programs and Fed monetary support, including zero interest rate policy (ZIRP), open-ended quantitative easing (QE), de facto yield curve control (YCC), and the buying of corporate bonds (including junk bonds and fixed-income ETFs – and perhaps will include equity ETFs at some point). This de facto “Fed put” has induced a speculative fervor, FOMO (“fear of missing out”), and a TINA (“There is No Alternative!”) mindset for risk assets – particularly given infinitesimal bond yields and a falling dollar. Furthermore, while COVID cases have risen with the economy’s attempt at reopening, the death rate is down 75% since its peak in April, as the people being infected this time around are generally younger and less vulnerable and hospitals are better prepared.

However, we have witnessed extreme bifurcation in this market, with certain secular growth segments performing extremely well and hitting new all-time highs, while other segments are quite literally in a depression. And although the pandemic has exacerbated this situation, it has been developing for a while. As I have often discussed, when the trade war with China escalated in mid-2018, the market became highly bifurcated to seek the perceived safety of the dominant mega caps over smaller caps, growth over value, and secular growth Technology over the neglected cyclical growth sectors like Financials, Industrials, Materials, and Energy. It rotated defensive and risk-off even given the positive economic outlook. This is also when the price of gold began to ascend. Yes, gold has become much more than just a hedge; it now has its own secular growth story (as discussed below), which is why Sabrient’s new Baker’s Dozen for Q3 2020 includes a gold miner.

So, while Sabrient’s flagship Baker’s Dozen portfolios over the past two years have been dominated by smaller caps, the value factor, and cyclical sectors – to their detriment in this highly bifurcated market – you can see that our newer portfolios since the enhancements were implemented have been much more balanced among large, mid, and small caps, with a slight growth bias over value, and a balance between secular growth and cyclical growth companies.

In this periodic update, I provide a market commentary, offer my technical analysis of the S&P 500, and review Sabrient’s latest fundamentals-based SectorCast rankings of the ten US business sectors, and serve up some actionable ETF trading ideas. In summary, while our sector rankings look neutral (as you might expect given the poor visibility for earnings), the technical picture is bullish, and our sector rotation model remains bullish.

As a reminder, Sabrient has introduced process enhancements to our forward-looking and valuation-oriented stock selection strategy to improve all-weather performance and reduce relative volatility versus the benchmark S&P 500, as well as to put secular-growth companies (which often display higher valuations) on more equal footing with cyclical-growth companies (which tend to display lower valuations). You can find my latest Baker’s Dozen slide deck and commentary on terminating portfolios at http://bakersdozen.sabrient.com/bakers-dozen-marketing-materials. To read on, click here....

Investors in U.S. equities seem to have embraced a new market paradigm in which upside spikes come more swiftly than the downside selloffs. Remember when it used to be the other way around? When fear was stronger than greed? The market is consolidating its gains off the early-October V-bottom reversal, and no one seems to be in any hurry to unload shares this time around, with the holidays rapidly approaching and all.

Scott MartindaleAlthough the large caps set new highs early on Friday, small caps and NASDAQ have not come close to their prior highs. Friday closed with extreme weakness across the board, and it was on high volume. The technical picture and our fundamentals-based sector rankings have both taken a bearish turn, so we might see more weakness ahead.

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Scott Martindale“Stocks fall on Fed taper discussion.” That’s the gist of what you heard in the media on Wednesday to account for the market’s late-day pullback. There’s always some sort of attempt to explain daily market action. But the reality is that investors simply must take a periodic breather to regroup and retrench, particularly when making an assault on round-number resistance for a major index.

smartindale / Tag: sectors, iShares, ETF, SPY, VIX, TSLA, MA, SBNY, CACI, QCOM, JAZZ, GNW, ALK, IYF, iyw, IYK, IYH, IYE, IYM, IYJ, IYZ, IDU, IYC / 0 Comments

Scott MartindaleThe U.S. stock market has been reluctant to provide eager bulls with a tasty entry point ahead of the much anticipated year-end rally. Although the major indexes have seen fit to consolidate a bit and work off some of their overbought conditions, bulls have hoped for a something more substantial. But very few holders are selling these days.

smartindale / Tag: iShares, ETF, sectors, EEM, TLT, SPY, VIX, IYF, iyw, IYK, IYC, IYH, IYM, IYE, IYJ, IDU, IYZ, GOOG, MDSO, ASPS, V, TDIV, QABA, HOLX, TSLA, SZYM, JAZZ, STX, AL, ALK, GNW, NXPI / 0 Comments

I doubt that this will come as much of a surprise even to the most bullish Tesla Motors, Inc. (TSLA) investor.  The irony of incorporating lyrics from KISS, a band which has made a very nice living on hype and theatrics, shouldn’t be lost when relating to Tesla.  Co-founder, Elon Musk, an inventor and entrepreneur who isn’t shy about hyping his cool electric vehicle into a $21 Billion valuation, said the following after Q1’s positive free cash flow claim:

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Scott MartindaleThe intransigence continues in Washington, and it has kept stock market buyers at bay until they get the go signal from Congress. This has left the sellers in control as investor sentiment has temporarily shifted from a buy-the-dip mentality to protect-your-gains and preservation-of-capital.

smartindale / Tag: iShares, ETF, sectors, SPY, VIX, TSLA, CACI, QCOM, MPC, EOG, iyw, IYE, IYF, IYK, IYJ, IYC, IDU, IYM, IYZ, IYH / 0 Comments

Scott MartindaleCentral banks reiterated their commitment to supporting the global economy, and US investors showed their approval. The central banks are clearly prepared to keep the liquidity flowing for now, austerity be damned. Such statements are music to investors’ ears.

smartindale / Tag: iShares, ETF, sectors, SPY, VIX, TSLA, HRS, CACI, BLK, SPG, IYF, iyw, IYK, IYH, IYC, IYE, IYM, IYZ, IDU IYJ / 0 Comments

LEA vs. TSLA

by Robert Maltbie,  StockJock.com

The Long:   Lear Corp.  (LEA)
The Short:  Tesla Motors Inc.  (TSLA)

Lear Corp. (LEA) $ 88.00 -- 6-12 month target: $104

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