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The Sector Inspector. Week 5.

Edition 0004. 02.05.2022.


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 ma that is down.

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 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 = 5-week closing high or low.

2 = 13-week closing high or low.

3 = 52-week 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 02/05/2022, 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.

Two weeks ago we had 5 of 11 sectors finished in the green, and this week we had 8 of 11 sectors finish in the green. Energy took the gold, Financials the silver, and discretionary bounced for the bronze. These 3 sectors closed with a gain larger than SPY. Lagging on the week was communication services. Energy pushed to a 52-week closing high as the large cap sector universe remains, on average, 7 weeks removed from its last 52-week closing high. The quantitative momentum condition remains unchanged, but we see an improvement in the quantitative trend condition from health care as it remounted its 40-week simple moving average.


Sector performance sorted by the year-to-date rate-of-change.

Sorted by YTD, we see energy remains in the lead as the financials now have gained 2.68% YTD. Looking below to the relative comparison chart, we can see that real estate dropped to the bottom of the pack, while communication services fell from 6th to 9th as materials and tech traded places.


Relative performance chart. This shows the year-to-date performance in a more visual way.


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 with the bronze in 3rd place, gaining 3.54% in value and outperforming SPY. This is a massive improvement from two weeks when it finished in 11th place losing almost -1.29% in value. XLY saw buyers around the $178 level and saw sellers near its 40-week simple moving average. Amazon had a massive 9.49% gain on earnings and while Tesla closed up 9.09% two weeks removed from its earnings. Momentum is still declining. Relative strength had a nice bounce from its support level. Bulls are looking for XLY to remount its 40-week simple moving average, while bears are looking for the September/October lows to fail around $178


Financials (XLF)

XLF finished the week in 2nd place and outperformed SPY for the silver, up from 3rd place two weeks ago. It gained 3.56% in value. It is still in a quantitative uptrend despite a touch of increased volatility with the low from 2 weeks ago undercutting the last swing low from late December 2021. Momentum closed, just barely, above its downward sloping trendline on US treasury yields rising last week. Relative strength also closed above its downward sloping trendline and is breaking out of its 7-month falling wedge.


Materials (XLB)

XLB finished the week in the 9th position, down from 8th last week, and lost -0.12% in value. While copper and agriculture input names were up, the largest names in the sector were down. Price is now rangebound. Momentum and relative strength are looking for support. Bears are looking to see price head down to $78 which marks the September/October 2021 lows, while bulls are looking for XLB to remount its 40-week simple moving average.


Real estate (XLRE)

XLRE 10th last week, down from 6th the week before. XLRE gave back -0.28 in value. While quantitatively still in an uptrend as price closed above a its rising 40-week simple moving average, XLRE is rapidly losing momentum. Relative strength lost its 40-week simple moving average and its upward sloping trend line. Bears are watching for price to head break below its 40-week simple moving average and head down to look for buyers around $44. Bulls are looking for buyers to keep price above its 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 the week in 8th position, down from 7th a week before. XLP gained 0.28% in value as Walmart closed up 1.32% and Costco finished with a gain of 5.55%. 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 for the 3rd week in a row. It didn’t outperform SPY, but did gain 1.39% in value as the 10th largest name in SPY, United Health, finished up 3.67%. Price remounted its 40-week simple moving average. Momentum continues to decline. Relative strength is battling with its 40-week simple moving average and still inside off its coil (symmetrical triangle).


Utilities (XLU)

XLU finished in the 6th position last week, which is up from 9th place the week prior. Underperforming SPY, utilities gained 0.77% in value. For the second week now, XLU is breaking down from its almost 2-year ascending triangle. Price is still quantitatively in an uptrend with price above its upward sloping 40-week simple moving average. Momentum though is now in a quantitatively questionable condition as the momentum oscillator line has fallen below its moving average. Buyers did step in as price dropped to its 40-week simple moving average and momentum is still above its upward sloping trendline. Things with XLU are now in a very tentative position. Relative strength is breaking below its upward sloping trendline, though still above its 40-week simple moving average.


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 last place, giving back -1.58% of value. It was a big week for XLC with FB finishing down -21.42% on poorly received earnings and guidance. That lost was tempered by the larger GOOGL finishing up 7.46% on its well-received earnings. You can see from the candle, there was intraweek volatility. XLC continues to be the only sector in the large-cap universe with a quantitatively negative trend and momentum condition. Price is still holding above its 38.2% Fibonacci retracement from the Covid-low to the September 2021 high. Relative strength continues making lower-lows.


Energy (XLE)

XLE finished with the gold medal yet again and outperformed SPY. Energy gained 4.98% in value. XLE is up over 24% YTD. Last week’s engulfing candle led to another week of gains as price is headed to the 61.8% Fibonacci retracement level from the June 2014 highs to the March 2020 lows. Momentum is looking strong after breaking above its 10-month long coil (symmetrical triangle). Relative strength is strong and on the verge of making a 52-week high.


Industrials (XLI)

XLI finished the week in 7th position, gaining 0.41% in value, and moving up in the rankings from last week’s last place finish. Even with a 13.39% gain in UPS, a 7.50% gain in GE, a 2.97% gain RTX, and an 8.33% gain is BA, price didn’t do much. It continues to test the $99.50 level which marks the low of its 7-month trading range. Momentum is looking to turn negative as we are now 12 weeks removed from XLI’s last all-time closing high. Relative strength is still falling after not making it back to its 40-week simple moving average.


Technology (XLK)

XLK finished last week in 5th place, underperforming SPY, and gaining 1.01% in value. The candle looks weak, though above its rising 40-week simple moving average. Two weeks removed from big earnings, APPL finished with a gain of 1.21% while MSFT finished with a loss of -0.75%. Momentum is declining. Relative strength is holding its upward losing trend line and 40-week simple moving average.

 

Sector Summary Table

With 68% of SPY’s market cap still in a quantitative uptrend, things aren’t that bad. This is a change from last week as XLV and XLK remounted their 40-week simple moving averages. The issue is the momentum. We did not see an uptick in momentum to confirm the uptick in trend. 80.75% of SPY’s momentum, judged quantitatively, is neutral. This leaves room to move in either direction. While SPY is vulnerable, we must maintain an unbiased mind, and one that is open to a wide range of possibilities.


Source for current weights: https://www.sectorspdr.com/sectorspdr/



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