Edition 0016. 05.07.2022. Week of 05.02 - 05.08.2022.
This is the weekly commentary that examines all 11 S&P sectors. We first analyze the large cap sectors in depth. We look at price, trend, relative strength, and momentum. Then we check in on the sectors in the mid-cap, small-cap, and equally-weighted large cap spaces.
Key Takeaways
Cyclical sectors remain mixed with XLY and XLF in intermediate term downtrends while XLB and XLRE remain rangebound.
Defensive sectors are strong with XLP and XLU in uptrends while XLV rangebound.
Sensitive sectors are mixed with XLC, XLI, and XLK in intermediate term downtrends and XLE in an uptrend.
There is more market cap, 65.75%, in downtrends than uptrends, 14.25%. There is 19.75% in neutral trends, with neutral momentum, so how XLV, XLB, and XLRE resolve is very important.
There is more market cap making lows than highs.
Across the cap-scale, we continue to see more new lows than highs.
Across the cap-scale, Year-to-date, on average, equally weighted sectors are down the least. They are followed by large, mid, and small caps are down the weakest.
S&P 500 Large-Cap Sectors
Sector Performance Table. Sorted by 1-week rate-of-change.
Click here for the performance table guide. Click the performance table to enlarge.
Last week 5 of the 11 sectors closed with a gain. All 4 of those outperformed SPY. The top performer was energy followed by utilities, financials, communications, and industrials. The laggards were staples, discretionary, and real estate.
The new lows far outnumbered the new highs. XLE printed a 52-week closing high as discretionary printed a 52-week closing low. Tech printed a 13-week closing low. Health, materials, staples, and real estate printed 4-week closing lows.
We saw the average distance from the last 52-week closing high continue to grow. We have gone from -6.76% to -7.17% to -8.44% to -10.99% and now to -13.75%. That said, we are 2 weeks removed from a 52-week closing high in staples, and 4-weeks removed from all-time closing highs in utilities and healthcare.
From a quantitative perspective, energy, utilities, and staples are in confirmed uptrends with positive momentum conditions. Relative strength, using a 26-week lookback period, ranks, in descending order, energy, utilities, and staples.
Sector performance sorted by the year-to-date rate-of-change.
Click here for the performance table guide. Click the performance table to enlarge.
Year-to-date sector and SPY performance.
Click to enlarge.
Year-to-date, XLE continues well ahead of the pack. XLU and XLP are battling both each other and the 0 line showing a YTD gain. XLC, XLY, and XLK lead the losses. XLRE, XLK, XLY, and XLC are all underperforming SPY this YTD.
Sector Charts!
Cyclical sectors: sectors that tend to lead as the economy expands and lag as
the economy contracts.
Consumer Discretionary (XLY). Click to enlarge.
XLY lost 2.90% in value last week. It finished in 10th position and underperformed SPY. Price remains below its downward sloping 40-week simple moving average. Price printed a 52-week closing low. The next logical level to watch is $149/$150 which marks the March 2021 low. Momentum is negative. Relative strength continues straight down below its smoothed downward 40-week moving average of relative strength. XLY is in a downtrend.
XLY was dragged lower by its largest component, AMZN. NKE also had a very negative week. The reopening trade of lodging, resorts/casinos, and travel services ere also down big.
Financials (XLF). Click to enlarge.
XLF gained 0.67% in value last week. It finished in 3rd position and outperformed SPY. Price remains below its downward sloping 40-week simple moving average. The next logical level to watch is $32/$33 which is roughly its 38.2% Fibonacci retracement from its March 2020 low to its January 2022 high. Momentum is negative. Relative strength remains in its falling wedge as its smoothed 40-week simple moving average remains flat. XLF is in a downtrend.
XLF was a mixed picture. Credit services were down, but banks and capital markets were up. Insurance was mixed.
Materials (XLB). Click to enlarge.
XLB lost 0.59% in value last week. It finished in 7th and underperformed SPY. Price remains chopping around its flat 40-week simple moving average. Price printed a 4-week closing low. Momentum continues to decline just above 0. Relative strength is holding strong above its 15-month breakout line. XLB is rangebound.
Copper and steel were down big. Agriculture and chemicals were mixed.
Real estate (XLRE). Click to enlarge.
XLRE lost 3.8% in value last week. It finished in 11th position and underperformed SPY. Price has sliced through its 40-week simple moving average which has now turned down. The next logical level of support is around $44. $44 has been holding as support for 10 months. Momentum is positive but threatening 0. It is also flashing a negative momentum divergence. Relative strength is in the middle of its 26-week range and still above its last breakout level. XLRE is rangebound above $44.
Industrial and residential REITS were down took significant losses, while specialty, retail, office, and healthcare were mixed.
Defensive sectors: sectors that provide goods & services that people require
in both economic expansions and contractions.
Consumer Staples (XLP). Click to enlarge.
XLP lost 1.18 in value last week. It finished in 9th position and underperformed SPY. Price remains above its upward sloping 40-week simple moving average. Price printed a 4-week closing low after testing its 161.8% Fibonacci extension from its pre-Covid peak to its Covid low. Momentum is well above 0, but flashing a momentum divergence. Relative strength remains very strong and printed 52-week high. XLP is in an uptrend.
Staples was mixed. Discount stores and household/personal products were mostly down. Packaged food and confectioners were mostly up.
Healthcare (XLV). Click to enlarge.
XLV lost 0.39% in value last week. It finished in 6th position and underperformed SPY. Price has fallen sharply for the last 4 weeks. Price is below its downward sloping 40-week simple moving average and printed a 4-week closing low just 4-weeks from its last all-time high. Momentum continues to decline in an almost failed breakout look. Relative strength was rejected at prior resistance but remains above its smoothed upward sloping 40-week simple moving average. XLV is rangebound.
XLV was very mixed. Drug manufactures, diagnostics/research, and medical instruments were mixed. Medical devices and biotech was down. Medical distribution, retailers, and medical care were up.
Utilities (XLU). Click to enlarge.
XLU gained 1.33% in value last week. It finished in 2nd position and outperformed SPY. Price is no longer over-extended. Buyers stepped in at a textbook confluence of support. Price remains above its breakout level and its upward sloping 40-week simple moving average. Momentum is strong and confirmed its previous all-time high just 4-weeks ago. Relative strength is very strong and is holding above prior resistance at a 52-week high. XLU is in an uptrend.
While all of XLU’s groups finished higher except for water.
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). Click to enlarge.
XLC gained 0.52% in value last week. It finished in 2nd position and outperformed SPY. Price remains between its 50% and 61.8% Fibonacci retracement levels from the March 2020 low to the September 2021 peak. It is also noticeably extended below its downward sloping 40-week simple moving average, and just barely above its 52-week closing low. The next logical level to watch to the downside is the $55-$57 zone which marks the 61.8% Fibonacci retracement level. Momentum and relative strength are deeply negative. XLC is in a downtrend.
XLC was deeply mixed. The big boys, GOOG and FB were positive, as were the telecom services. Entertainment, electronics, and broadcasting were all negative.
Energy (XLE). Click to enlarge.
XLE gained 10.34% in value last week. It finished 1st position and outperformed SPY. Price closed decisively above above $80 and is on a trajectory $101.50, its all-time highs made back in 2014. Price closed at a 52-week high. Momentum remains in an uptrend as does relative strength. XLE is in an uptrend.
All of XLE’s groups finished higher.
Industrials (XLI). Click to enlarge.
XLI gained 0.40% in value last week. It closed in 5th position and outperformed SPY. XLI remains below its downward sloping 40-week simple moving average. Momentum is negative. Relative strength is acting strong here. It remains above its upward sloping trendline, and above its smoothed 40-week simple moving average which is flattening out but still sloping downward. The intermediate trend is down though price remains above $94, its March 2021 low.
XLI was mixed. Airlines, construction, distribution, business services, and staffing were all down. Farm/heavy equipment were up, as was aerospace/defense. Machinery, railroads, and freight were mixed.
Technology (XLK). Click to enlarge.
XLK lost 0.60% in value last week. It finished in 8th position and underperformed SPY. Price printed a 13-week closing low. Price remains below its downward sloping 40-week simple moving average. Price closed at a 13-week low. $143 has failed, and so the next logical level is the $128-$131 zone. This zone splits the difference between the 38.2% and 50% Fibonacci retracement levels off of the 2020 Covid-low to the December 2021 high. Momentum is negative. Relative strength is negative. XLK is in a downtrend.
The biggest names, including AAPL and MSFT were down. Semiconductors were mostly up. Software was down. Tech services, hardware, and components were mixed.
Large-Cap Sector Summary Table
Click to enlarge.
Source for current weights: https://www.sectorspdr.com/sectorspdr/
There is more market cap, 65.75%, in downtrends than uptrends, 14.25%. There is 19.75% in neutral trends, with neutral momentum, so how XLV, XLB, and XLRE resolve is very important. There is more market cap making lows than highs.
Weighted Sectors Across The Cap Scale
& Equally Weighted Large Caps
This table is sorted by Year-to-Date performance. Sorted by 1-week rate-of-change.
Click here for the performance table guide. Click the performance table to enlarge.
Across the cap-scale, we continue to see more new lows than highs.
In the mid-cap space, we saw gains from energy and modest gains from industrial, discretionary, and tech. The YTD picture remains the same. Energy is leading followed materials and utilities.
In the equally weighted large cap space, we saw gains from energy and modest gains from utilities, financials, and materials. The YTD picture remains the same. Energy is leading followed by utilities, staples, and materials. Energy printed a 52-week closing high.
In the large cap space, we saw gains from energy and modest gains from utilities, financials, communications, and industrials. The YTD picture is fading. Energy is leading and only utilities remain with a small gain. Energy printed a 52-week closing high.
In the small cap space, we saw gains from energy and modest gains from utilities and financials. YTD, only energy is positive.
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