Happy New Year to All!

Update

2023 has gotten underway with a far more robust rally than many were expecting to kick off the new year.  Some of this has been difficult to see given Technology’s underperformance and its weighting in the major indices.  Sectors like Consumer Discretionary, Communication Services, Real Estate and Materials are all up more than 5% to start the year, but yet US remains a relative laggard to Europe and most of Asia.

S&P and NASDAQ remain in technical downtrends from this time last year, cycles still show the chance for consolidation, and Technology continues to lag other sectors.  Yet a few major positives have certainly cropped up with such broad-based leadership from other sectors.  Additionally, the prospects of ongoing negative earnings revisions seem to have kept the most fundamentally oriented on the sidelines, despite some evidence of inflation cooling.  Finally, the first half seasonality in pre-election years tends to be one of the best periods of the four-year Presidential cycle, which might make near-term cyclical weakness prove short-lived.

Overall, I expect 2023 to be a much better year than last year.  I’ll hold off on discussing sector favorites and targets until my Annual Outlook webinar which takes place on 1/24/23.  Yet, it’s time to adjust the portfolio yet again and make some additions as well as a couple of subtractions.  As always, I preface those comments with a thorough review of the major sectors, shown in Equal-weighted terms vs. the Equal-weighted S&P 500.  I look forward to our journey in 2023, and thank you, as always, for your continued support and interest in my work.

Methodology

  • Relative strength vs. sector and index
  • At/near 26-week and/or 52-week highs
  • Positive momentum and/or Upward sloping moving averages on multiple timeframes
  • Lack of DeMark exhaustion on daily, weekly, monthly and/or in combination based on TD Sequential and/or TD Combo indicators
  • DeMark “TD 13 countdown Buys” utilizing TD Sequential and/or TD Combo indicators at/near lows on multiple timeframes
  • Elliott-wave theory
  • Positive momentum divergences (at/near lows for buy candidates), Lack of deterioration within its sector and at/near upper quartile of its annual range
  • Above-average bullish bases for lengthy timeframes which might precede technical breakouts

Additions (Upticks)

Upticks - January 2023
Source: Trading View

It still looks right to have some heavy exposure within Energy, and VLO fits the bill given its recent strength and technical improvement in recent weeks.   Daily charts showing the last few years of technical structure show this as a large triangle pattern with VLO pushing up to test resistance highs directly over $140.  While this stock will need to exceed November peaks near $142 before the larger rally starts to get underway, this looks like one of the more attractive intermediate-term risk/reward formations within Energy at the present.  Pullbacks should find support near $127-$130 which should translate into attractive risk/reward opportunities in the weeks to come.

Additions (Laggards)

  • Wynn Resorts, Limited ( WYNN)
Upticks - January 2023
Source: TradingView

WYNN, shown above, has proven to be the best performing stock in all of Consumer Discretionary over the last three months, having risen more than 60%.  As weekly charts show, WYNN bottomed out near $50 last June and is now approaching 100, a doubling in price.  However, momentum has now gotten overbought, and prices are nearing a very critical long-term downtrend which likely stops this rally into end of week.

While buying dips might seem proper given such a huge upshift in momentum of late, this looks to be a poor area to consider WYNN, and many looking at daily charts would be better served to examine how this appears on a weekly basis with prices moving right into trendline resistance.

Given that many of the casinos have surged given China’s reopening, I expect that many are due to backtrack now, as evidence of exhaustion is apparent on many different timeframes of China’s Large-Cap ETF,  FXI -0.13%

I expect WYNN to be a substantial laggard, and should weaken to support near $81, representing the 38.2% Fibonacci retracement of its rally off October lows.  However, additional weakness might happen into $70-$75.

Deletions

The “Upticks” List

TickerSectorPrice*SupportResistance
 REGN 0.29% HC728.1702791,860
 UNHHC485.1482487.1
 HUM 0.32% HC490.5470573, 601
 BMY 1.33% HC72.374.5091, 101
 LEN 1.78% CD98.869.998,114
 CASY 0.70% CD230224243, 253, 289
 ON 3.59% IT65.95577, 81
 PEP 0.49% Sp176.1161187, 202
 MNST -0.20% Sp102.285113, 124
 MPC -0.20% E121.8105129
 HES 0.64% E151.7130155, 162
 VLO 0.33% E137.61114159,176
 PGR 0.73% F130.7120132, 143
*1/17/22

The “Upticks” (Laggards)

TickerSector Price*Support Resistance
 EXPE 1.73% Cons Discretionary106.674.51109.50
 WYNNCons Discretionary 98.0181,75100
 GME -15.03% Cons Discretionary 21.81627.87
 TSLA 1.22% Cons Discretionary 131.5141,111207
 NCLH 5.65% Cons Discretionary 1610.3, 718.67
 OLLI 3.47% Cons Discretionary 53.437.67, 28.3363
*1/17/22

Sector Summary

SectorTickerPositioning
Energy XLE 0.93% Overweight
Healthcare XLV 1.33% Overweight
Industrials XLI 1.61% Overweight
Materials XLB 1.43% Overweight
Cons Discretionary XLY 1.16% Neutral
Financials XLF 1.18% Neutral
Staples XLP 1.05% Neutral
Utilities XLU 2.79% Neutral
Comm Services XLC 0.52% Underweight
Info Tech XLK 0.51% Underweight
Real Estate XLRE 2.53% Underweight
Disclosures (show)

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