What I Saw ( Week of 12.1.14 )

1. Do the airline stocks and oil continue to trend strongly in opposite directions?

ANSWER: Simply put, mostly yes. The below chart shows the following stocks ( OIL, AAL, ALK, JBLU, UAL ) relative to the broader market ( SPY ) over the last 5 days. Out of the 4 airline stocks chosen here, only ALK underperformed the market. Using OIL as a proxy for oil, investor sentiment is still negative, and some airlines stocks are continuing to benefit from the plunging price.

2. Do we see a continuation of last week's sell off in small caps and does that translate to a mini correction?

ANSWER: No. Overall equity risk ( SPY, IWM ) had a bid throughout the week. However I think another trend is more important to note. The strength of the ( $USD ) relative to other assets is clear. This is a trend that needs to be incorporated into every investment thesis moving forward if it has not already.

3. When risk (high beta small caps/high yield) is sold do we see a continued bid in Utilities and Consumer Staples?

ANSWER: Not yet. The below chart is confirmation of the previous observation that higher beta stocks were bought more aggressively. Both utilities ( XLU ) and consumer staples ( XLP ) underperformed both ( SPY, IWM ).

Overall a somewhat mixed week with the only clear dominant trend being $USD strength, and a somewhat mixed appetite for stock risk... to be continued...