New trends will develop!

Biotech and China still leading...

Oil and Gas took a hit yesterday.

While it is normal that new trends develop in a new quarter and especially in a new year, Oil and Gas was an important higher beta industry group for a neutral and not bearish market tape. The best month for momentum is the last month of a quarter (especially December). January is a mean reversion month, so some beaten down industries can develop new trends (if that is not the case, that would be very bearish!). So, we need to watch and see!

Higher beta industries that are still strong(er):

Aluminum, Biotech, Copper, Steel.

The rest of the stronger industry groups point to deflation!

Strongest Country ETFs:

Breath is still basing:

And new highs and lows are still improving:

Small cap value momentum strong (not to wonder, Jan is the strongest month for small caps).

Earnings declining:

Earnings will be key here. So far, the whole growth / long duration bear market was based on higher interest rates. As soon as most industries are hit with lower earnings (has not been the case for energy so far) we transfer from stagflation to inflation. Firms will fire people, and this is what the fed wants to see to tame inflation (sorry to be blunt) and consider a pause in hiking.

My take on the fed is, they will surprise in their aggressiveness to hike rates and sell their assets (bonds!). The bail out will come, but it will come much later than most market participants anticipate.

Once again: we need time, time, time to heal this market. Stay nimble! 80-90% Cash is a good thing in this market. Play stronger industry groups / Countries and relating (!!!) stock setups but only for the sake to be ready when we get an all-green signal (which might be only a tradable bear market rally).

So here we have it:

Here are interesting stocks and an example from yesterday: