Flipping The Switch:

Markets can be confounding with their sector rotation, and is a good argument for the barbell approach. The move over the last one month period has been turned upside down precisely when one compares it to the YTD returns. During the last one month period, the two best major S&P sector performers are far and away the strongest with energy and the finnies. The XLE and XLF are up by 17 and 9% respectively (notice tech only group in the red). Perplexing is that on a YTD basis they are easily the worst actors, with the XLE and XLF off by 38 and 9%. The XLE may have a hiccup here as it tests its 200 day SMA to the upside for the first time in nearly a year. Last week the energy ETF jumped more than 17% in the best WEEKLY volume in at least 5 years. Can someone say capitulation? The XLF has traded in more of a tight range, and therefore does not have that rubber band feeling of being too stretched, and susceptible to a snap back reaction. The finnies are swimming upstream, in the face of animosity. Buffetts 13F just showed him reducing stakes in a lot of his bank holdings, with a near complete exit in JPM (he did add to BAC). Look for the group to grind higher, as it baffles the majority. 

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