Download the Schwab app from iTunes®Get the AppClose

  • Find a branch
To expand the menu panel use the down arrow key. Use Tab to navigate through submenu items.

Midweek Market Trend for December 6, 2017

Follow us on Twitter @Schwab4Traders. For more technical insights, join my weekly webinar, Charting the Markets, where I provide market analysis and answer your trading questions in real time.  

The big story over the last week has been sector rotation. It appears that investors have been taking some profits in technology, the big winner so far this year, and moving into areas that have lagged, such as the financial (Figure 1), retail (Figure 2), and transportation stocks (Figure 3). There has also been a move from growth into value (Figure 4). Notice how the relative strength line of value to growth broke its downtrend (Figure 4) (A) and has started moving higher.

Figure 1: 

LeeBlog 12.05.17 Fig 1

Source: StreetSmart Edge®  

Figure 2: 

LeeBlog 12.05.17 Fig 2

Source: StreetSmart Edge®

Figure 3: 

LeeBlog 12.05.17 Fig 3

Source: StreetSmart Edge®

Figure 4: 

LeeBlog 12.05.17 Fig 4

Source: StreetSmart Edge®

The question now is whether this rotation has run its course or has further to go. To gain some insight, let’s look at technology. As of this writing (December 5), the technology sector has pulled back to its fifty day simple moving average and has bounced off it (Figure 5).

Figure 5:

LeeBlog 12.05.17 Fig 5

Source: StreetSmart Edge®

It has also held the 23.6% retracement level of its move from the July lows so far (Figure 6). If it can stabilize here, the rotation may be over. If it breaks down through the fifty day moving average, the rotation may continue. 

Figure 6:

LeeBlog 12.05.17 Fig 6

Source: StreetSmart Edge®

The odds of the decline being over will improve if the semiconductors (Figure 7) and the internet stocks (Figure 8) trade back above their respective fifty day moving averages.

Figure 7:

LeeBlog 12.05.17 Fig 7

Source: StreetSmart Edge®

Figure 8:

LeeBlog 12.05.17 Fig 8

Source: StreetSmart Edge®

Another potential clue to the status of the rotation could come from the action of the ten year treasury yield (Figure 9). If it can break through resistance of around 2.42, that could cause the financials to keep moving higher. If it can’t, the financials may lose their upside momentum.

Figure 9:

LeeBlog 12.05.17 Fig 9

Source: StreetSmart Edge®

The Comprehensive Schwab Guide to Buying and Owning Gold
The Comprehensive Schwab Guide to Buying and Owning Gold
Consider Closing Short Options Commission-free
"Consider Closing Short Options Commission-free

Schwab has tools to help you mentally prepare for trading

Learn more >

Talk trading with a Schwab specialist anytime.
 
Call 888-245-6864
M-F, 8:30am - 9:00pm EST

Get 500 Commission-Free Online Equity and Options Trades for Two Years

Learn More >

Important Disclosures

The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision. Examples are not intended to be reflective of results you can expect to achieve.

All expressions of opinion are subject to change without notice in reaction to shifting market conditions.

Past performance is no indication (or "guarantee") of future results.

Schwab does not recommend the use of technical analysis as a sole means of investment research.

Indexes are unmanaged, do not incur management fees, costs and expenses, and cannot be invested in directly.

(1217-74J5)

Thumbs up / down votes are submitted voluntarily by readers and are not meant to suggest the future performance or suitability of any account type, product or service for any particular reader and may not be representative of the experience of other readers. When displayed, thumbs up / down vote counts represent whether people found the content helpful or not helpful and are not intended as a testimonial. Any written feedback or comments collected on this page will not be published. Charles Schwab & Co., Inc. may in its sole discretion re-set the vote count to zero, remove votes appearing to be generated by robots or scripts, or remove the modules used to collect feedback and votes.