Another sector we continue to watch and have mentioned in previous recaps is Technology, as QQQ delicately remains above both its 200 and 50 day moving averages and the real story there is Apple, which has shrugged off Thanksgiving weakness rather well and appears poised to challenge the $400 level again. AAPL has a 14% weighting in the Nasdaq 100, so its day to day action is obviously impactful for the sector, not to mention the general market to some extent. SPY on the week also took in assets, to the tune of about $5 billion which is an indication of managers snapping up benchmark beta exposure so as not to miss a holiday rally, and can also be partially explained by short covering.
One sector that saw substantial redemptions las week was that of healthcare. XLV traded over 40 million shares last Monday versus average daily volume of about 11 million shares as about $500 million left the fund on the redemption side.
In the fixed income arena, JNK took in about $500 million as well, and this could be a reflection of managers becoming comfortable with high yield names in the fixed income space as a means to achieve better yields than are currently being earned in Treasuries, which many a fund manager has lamented are paying next to nothing at current levels.
Thus, a familiar trade that has been around for a few months is purchasing TBT or TMV in efforts to essentially “short” the Long end of the Treasury Bond curve, as TLT has traditionally been hard to borrow. This trade has not exactly worked out however for any sustained amount of time as any short term weakness in Treasuries (and thus rallies in equities), has petered out and reversed in the past few months.
With TLT falling sharply on Friday (more than 2%) and closing below its 50 day moving average (a level it has literally clung to for several months), this will be something to closely monitor throughout this week for macro level signs of risk appetite among investors and to see if this equity rally indeed has any legs.
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