The Greatest 5 Sectors, #23 | RRG Charts

This Time Know-how Beats Financials

After per week of no modifications, we’re again with renewed sector actions, and it is one other spherical of leapfrogging.

This week, know-how has muscled its manner again into the highest 5 sectors on the expense of financials, highlighting the continuing volatility out there.

Communication Providers and Shopper Staples have swapped locations since final week, whereas Know-how has entered at quantity 5, pushing Financials right down to sixth. The remaining sectors from seven to eleven stay unchanged.

This fixed shuffling is a transparent indicator of the market’s indecision. Imho, such volatility often would not accompany a sustainable pattern, and that is exactly what’s hurting trend-following fashions proper now.

1. (1) Industrials – (XLI)
2. (2) Utilities – (XLU)
3. (4) Communication Providers – (XLC)*
4. (3) Shopper Staples – (XLP)*
5. (6) Know-how – (XLK)*
6. (5) Financials – (XLF)*
7. (7) Actual-Property – (XLRE)
8. (8) Supplies – (XLB)
9. (9) Shopper Discretionary – (XLY)
10. (10) Healthcare – (XLV)
11. (11) Power – (XLE)

Weekly RRG Evaluation

On the weekly Relative Rotation Graph, the Know-how sector is displaying spectacular energy. Its tail is well-positioned within the enhancing quadrant, almost getting into the main quadrant with a robust RRG heading. This motion explains Know-how’s climb again into the highest ranks.

Industrials stays the one top-five sector nonetheless contained in the main quadrant on the weekly RRG. It continues to achieve relative energy, shifting greater on the JdK RS-Ratio axis, whereas barely shedding relative momentum. All in all, this tail remains to be in good condition.

Utilities, Communication Providers, and Shopper Staples are all at present within the weakening quadrant. Utilities and Staples present damaging headings however preserve excessive RS-Ratio readings, giving them room to doubtlessly curl again up. Communication Providers is shedding floor on the RS-Ratio scale however beginning to choose up relative momentum.

Day by day RRG: A Totally different Image

Switching our focus to the each day RRG reveals a considerably totally different story:

• Industrials has moved into the lagging quadrant, shedding floor on the RS-Ratio scale
• Utilities and Staples are rolling again into the lagging quadrant with damaging headings — not a fantastic signal
• Communication Providers stays near the benchmark
• Know-how reveals the strongest tail, almost finishing a leading-weakening-leading rotation

This each day view underscores the energy we’re seeing within the Know-how sector on the weekly timeframe.

Industrials: Going through Resistance

XLI dropped again under its earlier excessive after a robust displaying the week prior. There’s important resistance between $142.50 and $145.

In a worst-case situation, I feel XLI may even retreat to the hole space between $137.50 and $139.

The uptrend stays intact, however extra shopping for energy is required for a convincing break to new highs.

Utilities: Vary-Sure

XLU is now buying and selling in a spread between roughly $80 on the draw back and $83 on the upside.

It wants to interrupt above the previous excessive to proceed constructing relative energy.

The uncooked RS line has returned to its buying and selling vary, dragging each RRG traces decrease — not the strongest outlook for this defensive sector.

Communication Providers: Testing Resistance

The sector peaked virtually precisely at resistance supplied by its earlier excessive round $105, then closed on the decrease finish of the bar.

The uncooked RS line is managing to remain inside its rising channel, albeit horizontally.

A sustained upward value motion is essential for sustaining relative energy right here.

Shopper Staples: Struggling to Break Larger

XLP continues to face heavy overhead resistance between $82 and $83.

Its lack of ability to interrupt greater is beginning to harm relative energy.

The uncooked RS line has moved down from a latest excessive, dragging the RRG traces decrease.

The RS-Momentum line has already crossed under 100, positioning the weekly tail contained in the weakening quadrant.

Know-how: The Comeback Child

XLK, the brand new child on the block (once more), examined its overhead resistance degree round $244, peaking barely above it final week earlier than closing decrease.

Current energy has pushed the uncooked RS line convincingly greater, taking out its earlier peak from mid-December.

Each RRG traces are pointing strongly upward, with RS-Momentum already above 100 and RS-Ratio quickly approaching 100.

Portfolio Efficiency

With all this sector leapfrogging, particularly involving the heavyweight Know-how sector, the hole between the highest 5 sectors’ efficiency and SPY has widened to round 7%.

The drawdown continues, however I am sticking with this experiment and trusting the mannequin to return again and begin beating SPY once more.

Sure, a 7% lag sounds important (and it’s), however it will probably change quickly in such a concentrated portfolio. One or two robust weeks may simply flip this efficiency round, significantly if massive sectors like Know-how and doubtlessly Shopper Discretionary develop into a part of the highest 5.

#StayAlert and have a fantastic week. –Julius