Power Sector Review
December 27, 2021
As we run through the weekly sector review, we inevitably start with a view that either the markets are in big trouble and this is just a dead cat bounce, or we put in our time in correction and this bounce might just have a chance. It would be better if we didn’t have a view, but we are humans and that’s how it works. We keep an open mind that either can happen, but start with a bias. I feel I need to tell I lean a bit to a new move higher, but we certainly aren’t out of the woods, so every day we bounce provide more evidence which way things will turn out. Defensive sectors have lead for a bit now and growth had been blasted, now they are getting more neutral. It won’t take much for buyers to come in and swing that neutral to positive in the coming weeks. The washout levels we saw last week were worth noting in the view below. The first is how things looked in the sectors and subsectors after Monday’s close, the second it how they looked after Thursdays close. All short term breadth measures looking pretty washed out.
Chart Highlights
This is a lot of pink and red in one place
In the second shot not only did the formatting and appearance improve greatly, so did the numbers sporting plenty of green.
From the Subsector rankings view sorted by sector and then RS ranking, Information Technology subsectors can tell a story. IT Services and Software are both in the yellow and moving up a bit this week after coming off strong greens a month ago. Semiconductors were the strongest a month ago, trying to breakout and when that failed they came down hard into the orange as they try to find some footing. Then there is Hardware that pretty much lags other technology subsectors in both good times and bad. Doesn’t meant there aren’t some gems in the Hardware and Equipment subsector, but unless you are lucky enough to take the AAPL approach, margins tend to be pretty tight in a space that remains very competitive.
the equal weight sectors we build are still in a defensive posture. Technology is handing out in the middle. The mover for the week was Health Care. I also noted the Communication Services Sector has been on the ropes a good while, might be time it sees a little relief if we keep moving higher.
On the subsector level, strongest are still many definsives, but starting to see some of the laggards creep up. From the RS Gainers standpoint we note Consumer Discretionary and Health Care making the biggest moves. The list below is sorted by weekly performance and shows the top gainers. We cover many of them in the video, but one I missed completely was Software, and if you think Technology is still a potential leader, don’t ignore it.
The video will take you through our move down into the sectors that are moving and look at many of the setups based on our 4 pillars of relative strength. Also a quick introduction to the Custom RS scans that allow you to put in stocks, ETFs and mutual funds and rank them versus each other using our relative strength scoring.
As always, I hope this helps!
