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David Dierking

Sector Buy/Sell Signals – Week of November 4th

Most equity sectors, save for energy, are flashing buy signals thanks to last week's lineup of strong economic data. Indicators are looking particularly good in the foreign equity markets.

The market's rally last week on the heels of better than expected GDP, jobs and earnings pushed large-cap equities to new all-time highs. For small-caps, that still means sitting about 10% below all-time highs but it's a vast improvement from the 28% decline they were sitting at during the end of 2018. Most momentum signals are still signaling buys but technical indicators show that many sectors are due to take a breather.

The more intriguing segment of the market is overseas. International and emerging markets have been establishing a lengthy base and are beginning to turn north relative to the S&P 500. A stretch of outperformance in foreign equities has been long overdue and the recent pullback in the dollar is further acting as a tailwind. I think these groups still have plenty of room to run.

The fixed income side is still looking weak. Treasuries somewhat surprisingly logged gains despite the preference for risky assets. The 10-year note, which was testing the 1.5% yield level as recently as a month ago, is now back above 1.75%. I expect the next move to be heading towards 2% making long-term Treasuries a poor buy at this point.

Precious metals are flashing mixed signals. Gold and silver prices have encountered resistance as economic data and trade optimism improve but I still believe the next leg for the two metals is up.

Here is the full scorecard for the week ahead.

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