Edition 0002. 01.22.2022.
This is the weekly commentary that reviews all 11 sectors that form the S&P 500 ETF, SPY. We are looking at performance, trend, relative strength, and momentum.
We start with performance tables that allow us to track how the symbols have performed over several rolling periods of time. We can see New high/low details, as well as determine trend and momentum using quantitative measures. Here are a few notes to help you interpret the tables.
They are grouped first by family, and then sorted by performance.
Quantitatively, the general trend is determined by price in relation to its 40-week simple moving average. 1 means the trend is up. 2 means the trend is vulnerable. 3 means the trend is down.
1 = close is above the ma and the ma is up.
2 = close is below the ma and the ma is up, close is above a flat or down ma.
3 = close is below the ma and the ma is down.
Quantitatively, the general momentum condition is determined by a 12,26,09 Price Percentage Oscillator – think MACD. 1 means the momentum condition is positive. 2 means the momentum condition is positive but decelerating. 3 means the momentum condition is negative but accelerating. 4 means the momentum condition is negative.
1 = the oscillator line is above 0 and the histogram is above 0.
2 = the oscillator is above 0 but the histogram is below 0
3 = the oscillator is below 0 but the histogram is above 0.
4 = the oscillator is below 0 and the histogram is below 0.
The ranking of closing highs and lows is as follows:
1 = 21 day closing high or low.
2 = 63 day closing high or low.
3 = 252 day closing high or low.
4 = all-time closing high or low.
At the end of this edition, there is a summary table that uses current sector weights. These weights are constantly changing, and while were current on 01/22/2022, they almost certainly have changed since then. A link with the most up-to-date weights is provided below.
Sector Performance Table.
Sector summary table. Sorted by the 5-day rate-of-change.
Every S&P 500 sector ETF has closed in the red this week. The least bad was energy, followed by staples, utilities, and health care. Note, positions 2 through 4 are all 3 of the defensive sectors. It is also interesting to note that financials finished in 10th place, giving back almost -7.5% of its value. This actually makes sense because bonds finished up for the week, also adding to the “flight-to-safety” narrative.
5 of the 11 sectors in a quantitate uptrend as determined by the 40-week simple moving average having price above it and sloping upwards. 5 of the 11 sectors are in a neutral trend, meaning price is below an upward sloping 40-week simple moving average or price is above an average line is flat to down. Communications Services is the only sector in a quantitative downtrend with price below its downward sloping 40-week simple moving average. While 5 sectors are in a quantitate uptrend, only 3 sectors have quantitatively positive momentum. This makes sense because momentum generally shifts before we see it in the trend.
We see significant deterioration in the new swing lows column. Last week we had 2 sectors making new monthly swing lows, while this week we see 4 sectors making new monthly swing lows and we see 4 sectors making new quarterly swing lows. There are no new highs.
Sector summary table. Sorted by the year-to-date rate-of-change.
The YTD performance table also shows deterioration. Last week we had energy, financials, and industrials showing positive year-to-date performances. We’ve now lost financials and industrials. The only sector with positive year-to-date returns is energy.
Relative performance chart. This shows the year-to-date performance in a more visual way.
We can see the only positive sector is energy. We can also see staples (XLP) climbing from 4th position last week to 2nd position this week. Take a look at consumer discretionary (XLY) falling from 8th last week to now become the worst performer year-to-date. Utilities (XLU) climbed from 8th last week to 4th this week.
Sector Charts
Cyclical sectors: sectors that tend to lead as the economy expands and lag as
the economy contracts.
Consumer Discretionary (XLY)
XLY finished the week in 11th place, losing almost -9% in value. If $178 fails, I see $165.50 and then $150 below that. Price is still in an uptrend, as the 40-week simple moving average has not yet turned down. Momentum is declining rapidly, though well above the 0 line. RS is breaking below its 40-week moving average and pointing straight down. Hopefully we can find support above the August 2021 RS low.
Financials (XLF)
XLF finished the week in the 10th place, giving back almost -7.5% in value, though just 3 weeks off of its last all-time-closing high. It is in an uptrend, with price above its upwards sloping 40-week simple moving average. Momentum, while falling, does look as though it is trying to break above its downward sloping trendline. Relative strength is above its 40-week simple moving average and we are looking for it to break above the falling wedge pattern and make a high above October 2021’s relative high.
Materials (XLB)
Materials finished the week in the 9th position, though experienced selling and closed with a loss of just more than -6%. Price is now 4 weeks from its last all-time-closing-high. The uptrend has turned neutral now, as price has closed below its 40-week simple moving average. Momentum has also turned neutral as the PPO oscillator line has crossed below its 9-week moving average. Relative strength is below its 40-week simple moving average, though it is still holding its upward sloping trendline from September 2021.
Real estate (XLRE)
Real estate finished 5th this week and beat SPY. Price is still above its 40-week simple moving average and its December 2021 lows. That said, momentum has broken below its upward sloping trendline. Hopefully this loss of momentum will not lead price lower as it usually does. Hopefully buyers will step in and hold the December 2021 lows and its 40-week simple moving average. Relative strength is attempting to break above its ascending triangle which would prove the 2 December 021 attempts to breakout out were premature and not failed attempts.
Defensive sectors: sectors that provide goods & services that people require
in both economic expansions and contractions.
Consumer Staples (XLP)
Staples finished 2nd last week, losing -1.21% in value. It is also in 2nd place year-to-date, though not in positive territory. Its trend and momentum look healthy, though small-bodied candles are showing indecision. Relative strength is looking strong, with the RS line above its 40-week simple moving average and an upward sloping trendline.
Healthcare (XLV)
Healthcare finished in 4th position last week, finishing above SPY. Year to date, healthcare is in 8th position and below SPY. Both its trend and momentum are in question right now. Price closed below its 40-week simple moving average, and now we are watching for buyers to show up around the $124 level which marks its October 2021 lows and May 2021 highs. Relative strength is above its 40-week simple moving average and we are watching for a resolution from the coil (symmetrical triangle).
Utilities (XLU)
Utilities finished in the 3rd position last week. Year-to-date it is in 4th position, though not positive. Utilities is in a massive ascending triangle that is just shy of 2 years in duration. Trend and momentum are positive. Relative strength is on the verge of a 6-month high.
Sensitive sectors: sectors that rise and fall with the general economy, but at
the same time have a sensitivity to additional factors.
Communication Services (XLC)
Arguably the worst from a quantitative trend and momentum perspective, XLC finished the week 7th place, down almost 5.25% though it did finish above SPY. Year-to-date, XLC is also outperforming SPY. Price has close d below its December 2021 highs, and now we are watching the $68 level. That level represents the December 2021 highs and the 38.2% Fibonacci retracement level of the March 2020 lows to the September 2021 highs. Relative strength for last week was flat, showing its performance was roughly equal to SPY.
Energy (XLE)
Energy, The Street’s current darling, has taken first place again, though we are not awarding a medal since it has finished for a lost of almost 1%. Year-to-date however, XLE is the only positive performance with over 12.5% worth of gains. While only 1 week removed form a 52-week closing high, zooming out shows there is a lot of overhead resistance. This week price held the 50% Fibonacci retracement level from the June 2014 highs to the March 2020 lows. Momentum is looking very good with it breaking above a 10-month long coil (symmetrical triangle). Relative strength is making a 10 month high as well.
Industrials (XLI)
XLI finished the week in 6th position, giving back almost 5%. Both its trend and momentum are questionable. Price is now 11 weeks off of its all-time-closing-high but breaking below its 40-week simple moving average. Hopefully $99 will hold as support. Momentum was increasing into the week before last but is not flat. XLI needs buyers to step in and soon. Relative strength has been positive now for almost a month. It is now reaching for its 40-week simple moving average from below.
Technology (XLK)
Xlk finished last week in 9th place, just underperforming SPY itself. IT gave back over 6% in value, and year-to-date has given back more than 11%. This week is a big week for tech. We have 474 companies reporting earnings thi week, including Microsoft and Apple which are the largest companies in the tech sector and the S&P 500 itself. Price is sitting right at its 40-week simple moving average with $145, the October 2021 swing low, just below it. Unfourtunatly, the PPo oscialltor line has broken below its upward sloping trendline. This as foreshadowing for tech and the S&P large cap index does not sit well with me. Relative strength has also broken blow its upward sloping trendline and is not looking for buys above its 40-week simple moving average in the same way price itself is.
Sector Summary Table
This week the sectors that make up SPY are really at critical points. Only 26% of SPY’s market cap is now in a confirmed uptrend, and only 9.5% has positive momentum. SPY really needs buyers to step in and turn some of that neutral momentum to positive. Otherwise, SPY’s uptrend will not be able to continue.
Source for current weights: https://www.sectorspdr.com/sectorspdr/
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