Power Sector Review

April 1, 2024

The Big Picture

The majors closed out the week, month and quarter with broad participation. $QQQ showing most of the weakness. After gapping down Monday, it never could recover like the other two. $IWM was strong on the week and closed strong Friday. This $IWM strength comes with the markets broadening out in both sector participation and among size categories. The Power Universe powered ahead after another wobbly start. Get the complete rundown in the Macro Review as well as the Triple Play Review (video).

As we dig down into the Power Universe sectors, there was no RS movement at the top of the list. All the jockeying was in the bottom half where Information Technology and Communication Services kept dropping while Consumer Staples and Utilities edged higher. Utilities had a strong week coming in as the number 2 performer behind Materials. Consumer Staples came off the mat a month or more ago and is now hanging out in the middle of the RS rankings. This week we will look a little closer at Consumer Staples, but Utilities was a close second. Both of these sectors can perform decent and consistently in broader bull moves, but they usually lead in indecisive and tougher markets, so their resurgence might be the hint some corrective action in the broader markets could be on its way if they can climb the relative list. If not, it likely will continue to ride the consistency wave while the economy pushes forward.

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 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.

Breadth close the short week strong after starting off weak. Buyers took advantage of the lower volume late week to push the short term measures back higher.

It wasn’t just the shorter term measures, Moving Average breadth covers short, intermediate and longer term breadth, and this week most gained ground as the week went on and recent strength persisted. 

New highs across all time frames continue to grow as the week went on into this closing read. No one seemed to be afraid of buying into the new quarter after trying to resist most of the month. New lows vanished again.

Pressure Gauges show some pressure, albeit on lower volume, to close the quarter. Interesting to see two of the laggards, Real Estate and Utilities see the strong buying pressure to close out. You can check out the whole week’s action and scroll through each spreadsheet in the Weekend Power Snapshots to get a good feel for the flow.

Subsector Relative Strength

To end the quarter I posted the entire Subsector list broken down by sector. I highlighted the top and bottom 3 returns for the weekly, monthly and quarter returns. Over the last month (RSMovers-21), Information Technology and Health Care lost the most relative ground. 

Relative strength leaders for the week are all familiar names as they just changed positions. The RS Movers list was also limited this week. There was some good price movement, just not much on the relative basis when looking at the 3 month RS.

Zooming In

Consumer Staples

The EW index closed at highs this week for the recent action and new highs for this dataset from the 2021 peak. This sector is seen as a defensive sector, but in a bull market it can provide some decent returns and even a handful of up and coming growth stocks mixed in. It usually gets the most attention in poor markets, but as mentioned can provide good steady returns in strong markets as well, just often not quite as exciting as the rest of the markets.

The RS on the top of the chart is not that impressive, but it is sticking in the middle of the pack since the start of the year. The Cup and Handle breakout is going along with the market action, but the RSI lately seems to be stronger than the Power Universe itself. This playing above the rim while the CFG continues to put in positive reversals is a good pattern to see.

Relative Comparatives showing that this has not become a big relative leader yet, but most of these have been grinding higher all March and looking to get back above previous relative breakdown levels.

Breadth came off the lows in November and moved up strongly with everything and then saw an abrupt pullback to start 2024. However, since March began, the breadth measures began to gain ground with price and have spent the month progressing.  Longer measures look the best. It is fairly rare that the %>200sma in this space gets over 70% showing stronger participation than we normally see. Higher lows continue to build across many measures. 

Since the sharper pullback to start the year where new lows started to perk back up, but never got near the lows seen early last fall, those low measures have tapered very nicely since mid February with the improved price action.

Consumer Staples ETFs

The group of ETFs covering this space is a fairly small number but growing slowly. $PBH is always a theme to keep an eye on, but some new ones are starting to pop up. Below are the charts of three of the ETFs in the space covering large caps, equal weighted and small caps in the space. They are showing three distinctly different setups, but all are pointing higher and have momentum pointing that way too.

Consumer Staples Subsectors

Subsectors have put in decent months across the board. Food & Staples retailing the clear leader for the year, but not so much in March. All three are currently in RSI bull ranges over 60 with Household & Personal Products just now getting over the line. I think most focus should stay in the top two subsectors here as they are already improving on their Relative Comparative Charts.

Conumer Staples Leaders

Being only three subsectors in the space and not a ton of components, it breaks out pretty easily. Food & Staples Retailing often leads these days with names like $COST $KR $SFM $CHEF. Then comes Food, Beverage & Tobacco with a ton of names, but a few that standout like $KDP $KO $CELH $PPC $MKC. Finally, there is Household & Personal Products that usually isn’t that interesting but holds $ELF $SPB KVUE. So, it’s not just $PG and $CL we may be missing out on. But realize, if you are looking for relative strength out of this space, you will have to dig deeper and find those particular names or be really patient which probably wouldn’t be a bad idea for some portion of the portfolio.

Below are a few sector ETFs and a few of the stock charts that caught my attention. This is just a start. Always do your own due diligence and take ownership of any trade you decide is worth your efforts.

A new quarter is upon us and the markets are ready to give us their next play, if we listen. The first couple of days can be a lot of back and forth, but by the end of the week we should see some short term themes. The big question is whether they will be new themes or the same old, same old. Have a great week and if you like these reports, please share them and help me grow our viewership.

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!