Power Sector Review

May 1, 2024

The Big Picture

First big red monthly candle since the fall and everyone panicked back then as well. Not initially, but when it turned into a third month down after failing at resistance, it got a little dire in the sentiment and breadth picture. We are not there yet, we are just on the first month, but you are hearing some pretty loud chatter in the background. Who knows if the doomsayers will be right this time or not, but it doesn’t really point to that here. The worst looking is still the $IWM which has the potential for a failure swing on the monthly RSI as its price candle back tests the big breakout from a couple of months back. It is a pretty important juncture, but waiting for the next monthly candle to make any decisions doesn’t work in my world, so we use it as a background story and drop down for more actionable information.  

Power Universe equal weighted RSI chart below shows its a fairly shallow pull back so far and trying to hold around the smallest retracement we follow. Therefore, a failure that causes this to go a little deeper is not out of the question. This chart shows the RSI ending the month peeking at the 50 level with CFG running higher and trying to turn before getting near overbought. This paints the rebound with very little momentum and keeps the alert high for potential failure and more downside to come. However, we also have to expect a battle at the first spot of resistance, which is more likely where we ended the month.

The RS list below comes from a few different perspectives. Utilities were actually in the top spot some last week, but to end the month, Materials climbed back up. Utilities remained in second when looking at the 3mo readings.  I have the 3 month, 6 month and 1 year RS rankings to show different time frame views of where things are relatively. Health Care is a good example it has been very weak in the short term and almost had not participated in the bounce at all until the last couple of days, but is one of the strongest readings in the longer two measures after making big relative moves this week. Those can be great signals that your short term weakness my be closer to an end.

Snapshot Review

Remember, the reason I call these “snapshots” is because they are just one day’s data points and with many being short term readings. They can change quickly, so these spreadsheets can be very volatile from day to day and we are just looking at Friday’s data to see how they closed out the week. The Weekend Power Snapshot covers the entire week in a unique way. The snapshot views are now a daily post with a new weekend view giving a review of all the snapshots from that week, so check them out as well.

The markets ended the month with a good bit of red after showing some green shoots off the rebound lows and some breadth progression build. The last day of April is historically weak and it showed this year. I am not going to write a lot here because, while I want to record the end of month data, it is short term in nature and my mindset is already on to evaluating the next day, so this would be old analysis for the sake of filling space. 

Subsector Relative Strength

The subsector list broken out by sectors and relative strength shows the strength remains as clusters within sectors. There is very little green in the monthly gain column and the only outperformer clustering was in Utilities. 

Sorting for the monthly outperformers, we used a 1% loss on the week as our “outperformers” cutoff level and still only captured a few. Half of those are from Utilities.

Utilities subsectors came on in the latter half of the month, especially when the correction went vertical (down) versus the sideways action it had been tracking. Energy, Industrials, Financials, and Materials were all present, but a far cry from the dominance the commodity sectors have shown from early March. The beginning of the month is a good place to record and look at the larger time frame in the charts, but it’s more important right now to recognize that we are in the middle of a rebound in a correction that is trying to decide which direction to head next.

The lists below are made up of the weekly and monthly RS movers to show you where the biggest relative movement has been in both directions during those time periods.

Wrap Up

Sizing up what I see above has us maintain a holding pattern here until one side or the other seizes control or some more time passes. We aren’t there yet, but looking at the monthly chart at the top, it could definitely come in a decent amount more and the larger cap indexes would still be in a bull range. We are in the battle to see that next short term step in the larger picture, some defensives sectors are perking up while commodities take a little respite. This would suggest the correction continuing longer. If we start to see aggressive sectors emerge in the breadth numbers, those are worth following to see if they resume their uptrends before the markets as a whole decide to get there.

This information is for educational purposes only and is not a recommendation.  Please see the full disclosure in the footer.

As always, I hope this helps!