Weekly Update

Weekly Update – these last two weeks of Dec were holiday-shortened relative non-events, w/quiet activity and light attendance. The SP500 fell slightly on the week as some light profit taking pressured certain groups (like the internets, HMOs, retailers, and REITs, all of which fell ~1% on the week). There weren’t any major trends on the trading front as vanillas have been on the sidelines for the last few weeks. The transports fell 1% and flirted w/breaking its 20day MA for the first time since early Nov (the group was hit Thurs on back of YRCW’s successful exchange offer – this hit a bunch of the truckers). Also weighing on the transports –the airlines fell ~1.7% on the week on back of the Christmas bombing attempt; that said, the XAL is up ~22% in the month of Dec alone and is up ~167% from its Mar lows (the best performing group over both periods). The HMOs saw some profit taking, falling ~1.7% this week, although are still up ~11% in the month of Dec due to the health care legislative outcome being better than worst case fears (health care investors will be watching the reconciliation process closely in the weeks ahead). Tech remains the champ of this market, up more than 60% YTD (tech is nearly 20% of the market, ~600bp larger than financials, the #2 group). The semis saw some profit taking on Mon/Tues but buyers quickly returned and the space ended the week up small (the SOX is up 17% in the month of Dec alone, is up 71% YTD, and is up 90% from the Mar lows). The financials were off small this week and haven’t moved all that much from Aug trading levels (while the financials are up 133% from their Mar lows, 83% of that advance came in the 2 months after hitting that low). On a YTD basis, the banks are down ~9%; of all the major SP groups, the banks are the only sector down YTD. All that said, GS advanced 3%+ on the week, hitting multi-week highs, and is sitting just under its 50day MA (an important sentiment gauge for the financials and the broader tape).