Power Sector Review

April 15, 2024

The Big Picture

Weekly downside follow through was finally obtained by the sellers. Markets were wobbling some going into the week, but looked as if they were digesting it ok. This week we saw a one two punch on Wednesday and Friday gave the sellers the upper hand for the first time in a while. I discuss this in more detail in the Weekly Macro Review. The majors do remain in both daily and weekly RSI bull ranges, so it’s hard to be looking for more than a pullback for now. I just wonder if the action on Friday was more of a small capitulation that ends this 4-6 week sideways consolidation or the beginning of a larger vertical correction.

There were no absolute winners this week and the top of the RS list didn’t move, even with the selling this week. The bottom bounced around a good bit with Real Estate and Utilities making the biggest relative headway, while Health Care and Consumer Discretionary lost more relative strength ground. The interest rate issue is weighing on both of these spaces recently. Even the strongest spaces got hit this week as there was literally no place to hide. Again, that type of action usually comes near the beginning or right at the end of moves.

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.

We ended the week with a ton of red on the short term measures finally putting some pressure on the medium and long term measures, but so far they are still holding up ok.

The MA Snapshot is the best to show short, medium and longer term measures on one sheet. The short term really got hit here with Consumer Discretionary looking closest to a reflexive type oversold move. Some other short term extremes are getting close, but the longer %>200sma isn’t sweating it so far.

This kind of paints how we turned out. Buyers ran scared and sellers capitalized with the news driven fear. We will see if the buyers regrouped enough over the weekend to stop the bleeding here and put in a reversal making this a sideways consolidation that alternates with the vertical one we saw last Summer to Fall before this big rally started. The type of quick rush to selling we saw Friday has mixed results as to how predictive it is going forward, but there is no doubt the sellers made a statement to not forget about them.

Pressure Gauges sheet was a good tell to be looking for a short term bounce to better gauge where we really are. The beginning or the end? Participation in the bounce should be very helpful in making that determination. With Friday being a 90% down day, a tradeable bounce should be expected within one to three trading days and it usually lasts at least a few days to a week. From there, whichever side is more aggressive (which should show in the data) will wrest control and take us to the next leg.

Subsector Relative Strength

The subsector breakdown is filled with red arrows as well. Now weekly gainers and only Materials, Energy and Industrial subsectors are holding much for gains over the last month. I want to start including this full view each week as I feel it adds a lot of value to get an quick overview.

Leading RS sectors didn’t change much at all with the week’s selling other than trading spots with their neighbor. Oil & Gas Storage and Transportation is the only new face this week. From a mover’s perspective we can see there were no RS Gainers and only two RS losers, both of which are recent leaders. For RS Monthly movers, you can see here has been a big rotation as the market lost some momentum and started this sideways move in early March.

Wrap Up

The week we saw the first real battle the sellers have won in quite a while, maybe since the first weeks of the year. It came after wearing down the momentum for a few weeks and with a big dose of headline risk to seal the deal. To be sure, the price action was real and finally caused buyers to think twice giving an opening to more corrective action if the sellers can keep up the pressure. So far this year, they haven’t been able to string together more than a few days before rotation took over and pivoted us back higher. The grind higher kept people in one foot out the door stance and built a level of complacency from false starts for the bears that buyers quickly thwarted. This week is OpEx week, so it will have extra volatility, the question is if the sellers can make it a third week in a row down or do buyers get back in the ring? I believe either can happen, but with that extra back and forth from OpEx volatility, it will probably be worth trying to limit any big directional sector decisions until the end of the week or maybe even next. I think observing is a solid idea until one side or the other establishes themselves at this juncture. Remember, the beauty of paying attention every day is that we don’t have to trade anything until we like the setup, because with good data and focus, within a few days, one always seems to pop up. Keep an eye out during the week for individual sector and subsector video analysis, or sign up in the spot at the bottom and you will get an email when we put out new reports.

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!