Edition 0005. 02.12.2022.
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.
Three weeks ago we had 5 of 11 sectors finish in the green. Two weeks ago we had 8 of 11 sectors finish in the green. Last week we had 3 sectors finish in the green. XLE won gold, SLB silver, and XLF bronze. XLE gave us a fresh 52-week high closing high and is the only sector to rank this week that is in a quantitative uptrend with a positive momentum condition.
We can see some deterioration from a quantitative perspective. XLI’s momentum has turned negative. From a trend perspective, we went from 7 sectors above an upward sloping 40-week simple moving average to only 3. The average weeks from the last 52-week closing high has shifted from 7 to now 8 weeks ago. We also have XLC making a new 52-week closing low.
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.
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 8th place, gaining 2.13% in value and underperforming SPY. Price was unable to remount its 40-week simple moving average but is holding above $178 which were the swing lows from September and October 2021. Momentum is accelerating into its 0-line. Relative strength continues to trade below a downward sloping 40-week simple moving average. Price is going sideways for now. The largest stocks such as Amazon, Telsa, Home Depot, and Nike finished down, but the sector was held up by a very strong performance from some restaurants, travel services, resorts, and lodging.
Financials (XLF)
XLF finished the week in 3rd place, making that 3 weeks in a row of medals. XLF outperformed SPY for the bronze and finished up 0.02%. While price closed near the lows of the week, momentum is still above its downward sloping trendline. Relative strength still holding its breakout of the 9-month falling wedge. Price is going sideways to slightly up. The sector was supporting by a broad range of stocks performing including credit services, insurance, and bank names.
Materials (XLB)
XLB finished the week in the 2nd position, gaining 1.06% last week. XLB outperformed SPY, but price has now been rejected from its 40-week simple moving average 3 weeks in a row. The 40-week SMA is now sloping down. Momentum is accelerating to the downside and breaking below its pervious support. Relative strength is testing its downward sloping 40-week simple moving average. Bulls are looking for $78 to hold, which mark the September and October 2021 swing lows. Price is going sideways to down. The sector was supporting by broad participation from metal and mining stocks, as well as chemical and agricultural names.
Real estate (XLRE)
XLRE 10th two weeks in a row, underperforming SPY, and giving back 2.72% in value. Price is moving down from its flat 40-week simple moving average. Momentum is accelerating towards its 0-line from above, while relative strength is breaking below its upward sloping 40-week simple moving average. Price is going sideways.
Defensive sectors: sectors that provide goods & services that people require
in both economic expansions and contractions.
Consumer Staples (XLP)
XLP finished the week in 5th position, up from 8th a week before. XLP lost 0.84% but did outperform SPY. XLP is only 1 of 2 sectors, the other being XLE, that is in a quantitative uptrend with a positive momentum condition. Price is above its upward sloping 40-week simple moving average. Momentum is above its upward sloping trendline. Relative strength is above its upward sloping trendline.
Healthcare (XLV)
XLV finished in 6th position and gave back 1.55% in value while outperforming SPY. Price has closed below its 40-week simple moving average for the 2nd time in 4 weeks. Price is moving sideways. Momentum continues to accelerate towards its 0-line. Relative strength has stayed above its upward sloping 40-week simple moving average and is still battling to break above its coil (symmetrical triangle). XLV was red across the board except for a few drug manufacturers.
Utilities (XLU)
XLU finished in the 7th position last week, down from 6th, and lost 2.12% in value. XLU also underperformed SPY. Price continues to down from its almost 2-year ascending triangle. Perhaps now it is in a smaller, 5 month ascending triangle. Price has closed below its flat 40-week simple moving average. Momentum has crossed below its average line, but is still above an upward sloping trendline. Relative strength has broken below its upward sloping trendline and is testing its downward sloping 40-week simple moving average from above.
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 9th position giving back -2.61% of value. Price continues to make its lower-low and is now coming down to test the 38.2% Fibonacci retracement level from the March 2020 Covid low to the September 2021 high. Momentum continues to accelerate to the downside and relative strength has made a ALL-TIME low.
Energy (XLE)
XLE finished with the gold medal yet again and outperformed SPY. Energy gained 2.19% in value. XLE is up almost 27% YTD and continues making 52-week closing highs. Price is headed up 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 making 52-week relative highs.
Industrials (XLI)
XLI finished the week in 4th position, giving back 0.75% in value, and outperforming SPY. While we are seeing strength in aerospace & defense names, airlines, and heavy equipment, that participation wasn’t enough for a gain last week. Price is continuing to test $99.50 as support which is a level that has held for 8 months now. Price continues to close below its now downward sloping 40-week simple moving average. Momentum has now crossed below its 0-line. Relative strength has made a higher-low and is looking to test its declining 40-week simple moving average.
Technology (XLK)
XLK finished last week in last place, underperforming SPY, and giving back 2.95% in value. Price has closed below its upward sloping 40-week simple moving average. Price conties to trade in its range from $146.85 to $ 177.15. Momentum is accelerating to the down side as the PPO momentum osicallator line moves towards its 0-line. Relative strength is weakening and thretening to push below its 40-week simple moving average.
Sector Summary Table
Market cap in a quantitative uptrend has fallen from 68% to 21.75%. The amount of market cap that is in a downtrend has increased from 17.50% to 19.75%. Momentum has deteriorated as well. We have gone from 9.75% of market cap in a negative momentum condition to 17.25%. We also see an increase in 52-week lows. SPY is becoming increasingly vulnerable, and so 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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