Edition 0017. 05.15.2022. Week of 05.09 - 05.15.2022.
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, XLF, and now XLRE in intermediate term downtrends. XLB remains rangebound.
Defensive sectors are strong with XLP and XLU in uptrends while XLV remains rangebound.
Sensitive sectors are mixed with XLC, XLI, and XLK in intermediate term downtrends and XLE in an uptrend.
Relative strength, using a 26-week lookback period, ranks, in descending order, energy, staples, and utilities.
Lots of hammer candles at support levels.
There is more market cap, 65.5%, in downtrends than uptrends, 14.5%. There is 17.25% in neutral trends which is XLB and XLV. XLRE has resolved do the downside.
More market cap printed closing lows than highs.
Across the cap-scale, we continue to see more new lows than highs.
The equally weighted averages are the best of the worst, while small caps lead the losses.
Only 2 out of the 46 symbols remain in an uptrend with positive momentum according to the quantitative model. Those are RHS and RYU, the equally weighed staples and utility ETFs.
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 only 1 of the 11 sectors closed with a gain. 4 sectors - XLP, XLC, XLV, and XLU - outperformed SPY. The top performer was XLP. The laggard was real estate.
The new lows far outnumbered the new highs, as there were no new highs. XLV and XLB closed at 5-week lows. XLRE closed at a 13 – week low. XLC, XLI, XLK, XLF, and XLY closed at 52-week lows.
The average distance from the last 52-week closing high continues to grow. We have gone from -6.76% to -7.17% to -8.44% to -10.99% to -13.75% and now to -15.63%. That said, we are 1 week removed from a 52-week closing high in energy, 3-weeks removed from a 52-week closing high in staples, and 5 weeks removed from 52-week closing highs in healthcare and utilities.
From a quantitative perspective, the uptrends in XLE, XLP, and XLU are not being confirmed by accelerating momentum to the upside. Relative strength, using a 26-week lookback period, ranks, in descending order, energy, staples, and utilities.
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. XLY has taken over as the year-to-date laggard.
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 3.69% 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. Price bounced from the $149/$150 which marks the March 2021 low. Momentum is negative. Relative strength heading down below its smoothed downward sloping 40-week moving average. XLY is in a downtrend.
XLY saw its largest names fall. AMZN was down 1.50% and TSLA was down 11%+. The reopening trade of travel services, lodging, and restaurants were all down. As was apparel and footwear. Home improvement was flat. Specialty retail was mixed with sold gains from auto part companies such as ORLY, AAP, and GPC. In the leisure space, POOL was also up.
Financials (XLF). Click to enlarge.
XLF lost 3.48% in value last week. It finished in 9th position and underperformed SPY. Price remains below its downward sloping 40-week simple moving average. Price printed a 52-week low. Price bounced from the $32/$33 level 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 all read. The only companies I can see that did not lose value last week was TRV, BEN, and MSCI.
Materials (XLB). Click to enlarge.
XLB lost 2.41% in value last week. It finished in 5th position and underperformed SPY. Price remains chopping around its flat 40-week simple moving average., locked in its range box between $79 and $92. 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.
XLB was all red, led by losses in copper, gold, and steel companies. Chemical companies were down. Of note, IFF in the specialty chemicals group was up 8.20%. CF was up 4.05% in the agricultural input group.
Real estate (XLRE). Click to enlarge.
XLRE lost 3.88% in value last week. It finished in 11th position and underperformed SPY. Price continued lower below its 40-week simple moving average which has now turned down. Price fell through the $44 level which had been holding as support for 10 months. It did bounce from $42 which is the pre-Covid high and the 38.2% retracement from the March 2020 low to the January 2022 high. This is a little bit of a mixed message with the hammer forming that closed underneath the broken neckline of the head and shoulders topping pattern. A measured move projects a price target of $36. Momentum is negative after warning with its negative divergence. Relative strength is threating to a break down below its recent breakout level. It does remain above its upward sloping smoothed 40-week simple moving average. XLRE is in a downtrend.
The REIT space was all red. Specialty, residential, office, and healthcare REITS were all down. The standouts were in DRE, the industrial REIT, and O, the retail REIT.
Defensive sectors: sectors that provide goods & services that people require
in both economic expansions and contractions.
Consumer Staples (XLP). Click to enlarge.
XLP gained 0.30% in value last week. It finished in 1st position and outperformed SPY. It was the only sector to close with a gain. Price remains above the confluence of support with its upward sloping 40-week simple moving average and its 161.8% Fibonacci extension off of pre-Covid peak to its Covid low. Momentum is well above 0, but the negative momentum divergence is playing out. Relative strength remains very strong and printed 52-week high. It is at a key level of prior resistance. XLP is in an uptrend.
Staples was mixed. Discount stores, which house XLP’s largest names, were all down. Beverages were up. Confectioners were up. Packaged foods were up. Food distribution, brewers, and wineries/distilleries were up. Tobacco was mixed. Farm products were down. PM was the standout with a 5.55% gain.
Healthcare (XLV). Click to enlarge.
XLV lost 0.91% in value last week. It finished in 3rd position and outperformed SPY. Price has fallen sharply for the last 5 weeks. Price is below its downward sloping 40-week simple moving average, but it remains above the $124.50 level. Price printed a 4-week closing low. Momentum continues to decline and is just above 0 now. Relative strength is once again testing its prior resistance and remains above its smoothed upward sloping 40-week simple moving average. XLV is rangebound.
XLV was very mixed. The drug manufactures, such as PFE, MRK, and AMGN were up. In biotech, REGN and MRNA were up. VTRS, in specialty and generic drug manufacturers, was up big.
Utilities (XLU). Click to enlarge.
XLU lost 1.08% in value last week. It finished in 4th position and outperformed SPY. Price continues to test the confluence of support in its upward sloping 40-weeks imple moving average and its pre-Covid high/breakout level around the $71 level. Momentum is strong and confirmed its previous all-time high just 5-weeks ago. Relative strength is very strong and is holding above prior resistance at a 52-week high. XLU is in an uptrend.
XLU was mixed with no strength from diversified utilities. There was however strength in regulated electricity and regulated gas from XEL, ED, CMS, NI, and NRG in independent power producers.
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 lost 0.61% 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. Price printed a 52-week clsoing low but is still just above its pre-Covid high of $57.75. I am watching the $55-$58 level for support. Momentum and relative strength are deeply negative. XLC is in a downtrend.
XLC was mixed. GOOG was up, but FB and DIS were down. Aside from DIS, there was strength in the entertainment group from NFLX and CMCSA. Telecom services was down. Notably, EA was up 8%+.
Energy (XLE). Click to enlarge.
XLE lost 2.58% in value last week. It finished 7th position and underperformed SPY. Price remains above its $80 breakout level. Momentum remains in an uptrend as does relative strength. XLE is in an uptrend.
All of XLE’s groups finished lower last week. The explorer’s and producer’s were hit the hardest. The only company up on the week was BKR , 6%+,in the oil and gas equipment & services group.
Industrials (XLI). Click to enlarge.
XLI lost 2.53% in value last week. It closed in 6th position and underperformed SPY. Price printed a 52-week closing low. Price has closed below its downward sloping 40-week simple moving average and now below $94 which had been support for 14 months. Momentum is negative. Relative strength is testing its upward sloping 5-month trendline. Its smoothed 40-week simple moving average remains sloping downward. Price is in a downtrend.
XLI was mixed. Aerospace and defense was all down. Staffing was down, Railroads were down save UNP. Waste management, farm/heavy equipment, engineering, and airlines were all down. The standouts were CARR +6.38% and MAS +4.35% in the building products and equipment group.
Technology (XLK). Click to enlarge.
XLK lost 3.35% in value last week. It finished in 8th position and underperformed SPY. Price printed a 52-week closing low. Price remains below its downward sloping 40-week simple moving average. The $128-$131 zone acted as support last week. Momentum is negative. Relative strength is negative. XLK is in a downtrend.
XLK was mixed. The biggest names, including AAPL, MSFT, and NVDA were down. Semiconductors and semiconductor equipment were mixed. All of the groups were mixed. The winner in the XLK was FTNT. The software name gained 5.70%.
Large-Cap Sector Summary Table
Click to enlarge.
Source for current weights: https://www.sectorspdr.com/sectorspdr/
There is more market cap, 65.5%, in downtrends than uptrends, 14.5%. There is 17.25% in neutral trends which is XLB and XLV. XLRE has resolved do the downside. There is more market cap making lows than highs. My subjective analysis is different than the quantitative analysis on XLB and XLV. I have them range bound while the model has them in down trends. While it is true that price is below a downward sloping 40-week simple moving average, price has yet to break below support and put in a lower low.
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.
The equally weighted averages are the best of the worst, while small caps lead the losses.
Only 2 symbols out of the 46 remain in an uptrend with positive momentum according to the quantitative model. Those are RHS and RYU, the equally weighed staples and utilities ETFs.
In the mid-cap space, we saw gains from staples and utilities. The YTD picture has faded, as only energy remains positive.
In the equally weighted large cap space, we saw gains from Staples. The YTD picture has energy is leading followed by staples and utilities.
In the large cap space, we saw gains from staples. The YTD picture has faded, as only energy remains positive.
In the small cap space, we saw gains from staples and utilities. YTD, only energy is positive.
RSP / SPY. Click to enlarge.
This chart shows the ratio of the ETFs RSP (the equally weighted S&P 500) divided by SPY (the cap weighted S&P 500). When the ratio is headed higher RSP is outperforming SPY, and the opposite is true when the ratio is headed lower. The ratio is attempting to break above the yellow dashed line, marking the secular trend of SPY outperforming RSP since 2015. I am looking for confirmation with a break above the grey horizontal line marked by the orange question mark in addition to holding above the yellow dashed secular trend line.
Equally Weighted Large-Cap Staples ETF (RHS). Click to enlarge.
Equally Weighted Large-Cap Utilities ETF (RYU). Click to enlarge.
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