SMO Exclusive: Industry Strength Report 2023-12-15, Weighted Average +0.5 to 4.2 Strength Score (Strong-Average)

This 10-week Industry Strength Report provides market clarity and context.

Market strengthening update – SURPRISE! Banking now an industry strength leader, tied with Materials/Construction (including Homebuilders) rated Stronger (3rd strongest of 9 levels). Week ending 12/15/23:

• 12 of 29 industries strengthened and 0 weakened
• 4.2 Average Strength (scale 1-9, Strongest = 1, current reading is between 5/Average and 4/Strong)
• 1-week +0.5 points in strengthening
• 10 weeks ago 6.0 Average Strength (1.8 points weaker than current week)
• Market above Average strength, still room to run

These objective measurements
– enforce discipline and
– ensure an active focus on all key process checklist items,
a. throughout all phases of the market cycle and
b. without bias, emotions, feelings, interpretations, judgments, or opinions.

(12/15/23 top-down look is available here.)

Statistics

🔹 12 industries strengthened

1. Banking
2. Computer Hardware
3. Electronics (Chips/Semis)
4. Consumer Durables
5. Consumer Non-durables
6. Retail
7. Specialty Retail
8. Energy
9. Metals
10. Transportation
11. Leisure
12. Manufacturing

🔹 0 industries weakened

🔹 Strongest industries (Stronger rating, 3rd strongest of 9 levels):

1. Banking
2. Materials & Construction, home of Residential Construction/Homebuilders

🔹 Weakest industries (Average rating, 5th strongest of 9 levels):

1. Telecommunications
2. Food & Beverage
3. Automotive
4. Energy
5. Health Services
6. Media
7. Utilities
8. Chemicals
9. Drugs

Background

The goal of this?
To objectively and reliably find strengthening and weakening in the U.S. stock market.

Why?
The stronger your stocks, the greener your P&L.

Driving principle?
Market conditions matter - most stocks do what the market does and, when the market strengthens, likely so will your stocks. (Did you know 99 of 100 stocks fell during the Covid shutdown decline? See Market Conditions Matter.)

What does this mean at a practical level?
- In an uptrend, there will be more technical breakouts and price recognition of undervalued stocks.
- In a downtrend, there will be more technical breakdowns and undervalued stocks will become more undervalued.

In turn…
- Know when to be aggressive and conservative (position sizes and stops) and when your favorite set-ups are more likely to work/fail.

REPEATING:

Market conditions matter. 

IT REALLY DOESN’T HAVE TO BE SO COMPLICATED.