More evidence of cyclicals bottoming intermediate-term - Weekly momentum indicators are a useful technical tool to identify potential turning points in markets and stocks over a 1-2 quarter time frame. In general, I see the equity market shifting from offense, or risk on, to defense, or risk off, one to two times per year. Last week, I discussed our proprietary weekly momentary indicator, that tracks the percentage of stocks with rising weekly momentum for S&P 500 stocks, as beginning to bottom. Since June and through the summer, many stocks, notably cyclicals, stalled and either traded sideways or have been in corrections.

However, over the past two weeks, we see incremental evidence that more cyclicals are bottoming. Interestingly, two of the weakest sectors through the summer, energy and notably financials, stood out the past week as they began to finally show evidence of bottoming. I am not convinced yet these sectors are about to assume the leadership in the market, but I am encouraged that the weaker areas of the market are starting to show signs of bottoming. The bottom line here is that after a volatile summer, a growing list of stocks, notably cyclicals, including financials and energy, are finally showing evidence of bottoming which should help propel the market...

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