Edition 0003. 01.30.2022.
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.
Please know, if I refer to weightings in symbols, these weights are constantly changing. They were current as of 01/15/2022, though they almost certainly have changed since then. See the links for the most up-to-date weights.
Sector Performance Table.
Sector performance table sorted by the 5-day rate-of-change.
This week we see some, though tentative, sings of life. Last week every single sector lost value. This week we have 5 of the 11 sectors closing with a gain in value. Leading the way higher was, once again, energy for the gold medal. Tech earns the silver with a gain of 2.38%. Bronze goes to the financials with a 1.36% gain in value. Year-to-date, the only winner remain energy. From a quantitative perspective, XLU has lost its momentum reading of 1 leaving only 2 sectors now, XLE and XLP, with positive trend and momentum conditions. We also see the industrial sector having its trend turn negative. XLE, XLK, and XLF were the only sectors to outperform SPY last week.
Sector performance sorted by the year-to-date rate-of-change.
Relative performance chart. This shows the year-to-date performance in a more visual way.
We can see energy at the top, and we can see that the financial sector as reclaimed the number 2 spot from staples. Utilities has overtaken industrials for 4th
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 again in 11th place, losing almost -1.29% in value. XLY is now testing $178. The spinning top tells us we will have to wait and see what the buyers and sellers are planning for next week. Momentum is heading for its 0-line in a hurry. The relative strength line is looking to test its previous support. Next week is important with Amazon reporting earnings.
Financials (XLF)
XLF finished the week in 3rd place for the bronze medal outperforming SPY. It gained 1.36% value. It is testing its 40-week simple moving average for support. Below that we can looks to 35 as the next potential level of support. Momentum has yet to break its downward sloping trendline. Relative strength continues in the upper portion of its falling wedge.
Materials (XLB)
XLB finished the week in the 8th position, though experienced selling and closed with a loss of -0.98%. Price has broken below its 40-week simple moving average. The next potential level of support is $78. The relative strength line has been rejected from its 40-week simple moving average and broken below its upward sloping trendline. Momentum is positive, though will need to make a stand soon. Relative strength was rejected by its downward sloping 40-week simple moving average and has broken below its upward sloping trendline.
Real estate (XLRE)
XLRE finished 6th this week, giving back 0.15% in value. Price is testing its 40-week simple moving average and its December 2021 lows. The momentum oscillator broke below its upward sloping trendline which doesn’t give the bulls much hope. The relative strength line was unable to break above resistance and has turned down to test its 40-week simple moving average again. If XLRE is truly a bond proxy as they say, XLRE bulls might be hoping for bonds to rebound next week. Bulls are also hoping that the relative strength line can hold its upward sloping trend line and 40-week simple moving average.
Defensive sectors: sectors that provide goods & services that people require
in both economic expansions and contractions.
Consumer Staples (XLP)
XLP finished 7th last week, losing -0.37% in value. The trend still looks very healthy with price above its rising 40-week simple moving average, strong momentum, and a relative strength line that is holding its upward sloping trendline.
Healthcare (XLV)
XLV finished in 4th position again last week. Price broke below its 40-week simple moving average, but did hold $124.50 which was resistance in May/June of 2021 and held once as support in October 2021. Bull want to see price remount its 40-week simple moving average, momentum to bottom, and relative strength to break above the coil (symmetrical triangle) pattern it is in.
Utilities (XLU)
Utilities (XLU)
XLU finished in the 9th position last week. Utilities remains in its a massive ascending triangle that is just shy of 2 years in duration. It was close, but buyers managed to hold price above the upward sloping portion of the triangle. Momentum is waning and relative strength is holding its upward sloping trendline. Being considered as a proxy for bonds, XLU bulls are hoping for bonds to head up and XLU’s price to break above $71.50 – its pre-covid price 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)
XLC finished the week in 5th place, up 0.12%. Price continued down below $73.40, but did find support at the 38.2% Fibonacci retracement level from the March 2020 lows to the September 2021 high. Momentum is decidedly negative, but we are seeing a positive divergence with price and relative strength. Next week is very important with both Alphabet and Meta Platforms reporting earnings.
Energy (XLE)
XLE finished with the gold medal yet again and outperformed SPY. It is the only sector with a positive return this year-to-date. Price left us a beautiful bullish candlestick. This week price broke above 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 last position, giving back 1.48%. The doji managed to hold support around the $99.50 level which has marked the bottom if its trading range for the last 8 months. Bulls really want this $99.50 level to hold and for momentum to hold its 0-line. They will also be on the lookout for the relative strength line to head back up to test its 40-week simple moving average.
Technology (XLK)
XLK finished last week in 2nd place, outperforming SPY. It gained 2.38% in value. Buyer stepped in at the $146.85 level, which was the October 2021 swing low. This was certinaly helped by Microsoft’s and Apple’s great earnings reports last week. Tech bulls are looking for price to hold above its 40-week simple moving average, momentum to turn up, and relative strength continue to bounce from its 40-week simple moving average.
Sector Summary Table
Last week conditions worsened for SPY. XLI’s quantitative trend change to negative and XLU’s momentum condition changed from positive to neutral. SPY’s market cap in a quantitative uptrend fell from 26% to 18%. SPY’s quantitative momentum condition fell from 9.5% to only 7.5% with positive momentum. SPY really needs buyers to step in and turn some of that neutral momentum to positive. Microsoft and Apple’s earnings were a good start, now we need Alphabet, Meta Platforms, and Amazon to help keep SPY from falling further.
Source for current weights: https://www.sectorspdr.com/sectorspdr/
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