Rotation Report: New Year, New Game?

Happy New Year!  Thanks to you all for reading, sharing and help craft this weekly letter.  Hopefully we all have a healthy and prosperous 2015.  I'll do my part by continually evolving this weekly post by cutting the fat of excess charts and trying to add helpful commentary.

The market rotation picture is similar to that of a few weeks ago.  The same tech/biotech/consumer groups are leading, with signs of fresh defensive relative strength continuing to emerge.

The action in some growth names like BABA, MBLY, AMZN and GOOGL is a cause for caution.  This beautiful price structure and breakout in LifeLock got hit by an 18 wheeler Friday.

One can argue it's company specific, but it's never a good sign when a clean price structure in a leading group gets wrecked like that.

Many quality names are still above their rising 50D MA's, but we aren't at quality buying points.  On Friday I wrote about the small caps mini breakout.  It appears we've seen a classic front-running of the January effect.  We'll see how sentiment unfolds with further price weakness and go from there.

Let's dig in...

The U.S. Dollar continues it's unrelenting rally.  It's amazing how little resistance the 2009 and 2010 high have been

The Euro via FXE is at 9 year lows.  Again, it's quite telling how this has ignored various support levels on the drop.  The next ECB meeting is January 22nd.  Is the market just telling us a hail mary, mother of all QE's is coming?

It was an INSANE week in the German 10 year Bunds as the yield dropped 7.5%!  

In the last month alone the yield has dropped over 30%!   It seems like only a matter of time before US Treasuries follow it lower.

US industry groups:

Consumer discretionary relative strength is still being halted by this pivot line.  That's surely no reason to sell your retail stocks, but the slam-dunk phase of the consumer rally might be over.

Looking at the consumer dashboard we see Apple's relative strength continues to fall off.  Maybe it's company specific?  The necessity plays still have a strong look.

...Or maybe not.  We saw a nasty weekly reversal in the Personal Products index at the breakout area.

The homebuilders have stalled out multiple times at price and relative strength resistance recently, while lagging the market in the most recent rally.  That's not a bullish combo!

At the same time REITs are attempting to flex their muscle.  Some of the better multi month setups I see are in this group.  My list includes: SBRA, CDR, HT, APTS, MNR. PDM among others.  

REITs relative to tech are also reaching a critical turning point.

Last week I wrote about the Utilities RS break out.  Now we have a backtest of the key level

Energy has barely sold-off and it's already at the key support zone.  Risk reward is still extremely attractive on the long side.

Cloud computing ETF SKYY is re-testing a key pivot.  I'm searching this group for buy points.

This gigantic wedge in the internet index will be a big clue about technology's prospects this year.

Finally, a few weeks back I mentioned the bullish outside week in DBA.  It's actually broken down and is approaching a full retrace of the spring 2014 move.  Incredible!

Cotton (BAL) and sugar (SGG) have traded near major support areas for some time and there are few signs of life. 

 It's also worth noting wheat and corn are still showing some signs of strength noted a few weeks back.

Thanks for reading, trade 'em well!