Power Sector Review

March 4, 2024

The Big Picture

Markets were all up for the week, but once again, it took some back and forth to get there. I mentioned in the Weekly Macro Review that these “mushy” RSI trends in $SPY and $QQQ can continue to grind while they generally keep everyone on edge. All that is really happening is the RSI is settling in the RSI bull range while price grinds higher in everyone’s face…kind of like now. $IWM put in a strong week and cleared more levels keeping it in focus and keeping the opportunities flowing, even if the hot names and cap weighted indexes decide to take a break. The Power Universe got its breakout last week and saw the RSI oscillate back above 60 to close the week. There is plenty of room to expand if the broader markets want to.  There is nothing here that looks particularly concerning except the narrative. Charts are set up well and are not firing any warning shots going into the week, quite the contrary actually.

The equal weighted sector indexes are not showing a lot of movement this week. The bit of jockeying we did see was in the middle of the list with Energy and Consumer Staples building and Financials getting displaced by them. While I am not thinking Consumers Staples will become a big leader in the intermediate or longer term view, it is moving up the ranks currently, just not enough to make us want to pay that much attention just yet. I am just not that excited about anything new on this level right now, so I think we will just zoom in on a couple of subsectors this week instead.

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 and how they closed out the week. We now have a daily post of these snapshots, so I am not sure how long we will continue to cover them in this review.

Short term breadth looks good, a few pink spots, but nothing to be too worried about. This is to end the week, we saw some more back and forth during the week, but nothing to get overly concerned about on either side. There are a lot of 10day highs out there without seeing short term moving average percentages extended. Maybe January into early February did serve as a broader market rest while $QQQ, $SPY and the AI runners garnered all the attention. This is a positive going forward, not a negative, as things did broaden out under the surface most of February.

Moving Average breadth is only showing a few spots that are getting hot, but for the most part, things are over 50%, but not to hot to handle. 

After a little more shaky start for the big guys, the little guys took over and kept the pace all week. The week ended with a ton of green on the New Highs view and almost a flatline throughout the New Lows picture. This is what broadening out looks like.

Nothing crazy on the Pressure Gauges, but a few that might be worth a look. Don’t worry about the blanks on Precious Metals. They should read the same as the Advancers and Decliners, obviously since they are 100% and 0%. It is something to note after Precious Metals have underperformed for a while. Energy should also have all the Advancing Volume columns highlighted in dark green as they are all above 90% (excel does this sometime, but as far behind as I am, not going to take the time to fix it for this post). Semiconductors (covered 2 weeks ago) also finished the week with a 90% showing there are more than 4 names in the space moving well. 

Subsector Relative Strength

I like this view so much, I want it here every week as a staple, but it just takes up so much room. There is so much inside looking at the RS Shaded areas and how they have changed over the last quarter. Lots of moving parts and how they are fitting together. Basically, most of the current and emerging leadership on the sector level we have already covered over the last few weeks, so this week I am going to drop down and cover two subsectors again.

The weekly moves last week moved the rankings around a decent bit, but only Semiconductors and Internet & Direct Marketing moved on to the top RS Rankings list. Both of those names are on the radar even if not on the top list, but I do like seeing some new blood show up like Automobiles and Oil & Gas Production, but overall there was nothing really groundbreaking this week to report. Precious Metals had a strong end of the week, but not enough to move the RS needle just yet. RS Gainers and loser are all worth a look, but in the context of the larger uptrend, even considering the RS Losers here. Don’t automatically think that means short or absolute weakness.

Zooming In

Internet & Direct Marketing Subsector

This subsector falls in the Consumer Discretionary sector and consists mainly of internet retail names, but also has a few other stragglers. A space that fell out of favor quickly when the markets started showing weakness in early 2021 and fell hard into its fall 2022 lows. Today it looks like it might be ready to leave the base it has been building off those lows as the markets turn a new page.

The long term RSI chart here shows the drop off the highs in 2021 and then the subsequent base that has been building for almost two full years now. The current leg you can see saw an RSI bottom above 40 and hasn’t looked back since. A breakout of this base starts the retracement of the larger downtrend.

The zoomed in view shows a clean breakout of the smaller handle this week sent price right into the September highs which also corresponds with the longer term horizontal line you see on both charts. Clearing that really gets things started. RSI moved over 60  with authority this week after stalling there a couple of times this year.  

The breadth picture I took a much longer term view to show how breadth action acted in the red box through the downtrend and then into the green box during this fresh uptrend. NHNL Differential on top shows the biggest shift, but many of the short and intermediate term measures made substantially higher lows here in 2024 than over the past two years.

New highs are doing well, especially as we move out the time frame, which is good. If the breakout extends, it would be nice to see a few more spikes above the lines. New lows aren’t a factor here for now.

The relative comparative charts are picking up in the short term as this one breaks out after a lull during the sideways price actions. This shows the subsector is becoming an emerging leader within the Consumer Discretionary sector that is on the verge of breaking out itself.

Internet and Direct Marketing RS Rankings Leaders

The subsector is small enough to post the entire list, but if you want to play with it yourself, you can on the Internet & Direct Marketing Page. Many of the names have made strong moves, but in such large downtrends, I would still be watching digestion and continuation. The charts below give a few different looks that caught my eye.

Aerospace & Defense Subsector

Aerospace & Defense has been a mediocre sector in the thriving Industrials sector that looks to be ready to join the action. Names like BA and other airlines garner a lot of attention in the space, but it is usually the defense names holding everything together and marching forward. Not always, but usually. There is still work to do, but let’s look at what’s going on under the hood.

The RSI has been hanging in the top half versus other subsectors as a whole, but nearer the bottom of the ranks when just looking at the Industrials subsectors. However, on this chart, the blue 3mo line in the top window shows the shorter term RS is in an uptrend since early January. Price is breaking out of a small Cup-n-Handle pattern with a high handle as RSI remains in a strong bull range through the recent test.

Breadth in the space has stayed strong on the longer measures while grinding up on the shorter term ones. We still need the intermediates to get involved. Breadth is a progression, so they should start turning higher next before pulling the longer measures even higher.

The comparatives are not showing any advantage here at the moment. The only thing we can point to is the broken relative downtrends versus $SPY and $QQQ, but so far they aren’t responding to this current move.

Then we move over the the new highs and lows to see steady highs, but nothing interesting. Sure, another space where new lows are disappearing, but in order to get excited, we need new highs spiking. So far, these price highs are getting a pretty tepid response and those spikes would be very welcome to help solidify this breakout.

Aerospace & Defense Subsector RS Rankings

Aerospace & Defense is another subsector that we can post the whole RS Rankings list here, but as mentioned above, if you want to play with the list yourself or click through to the trading view stock charts, you can click the link to visit the Aerospace & Defense Page and go to town. A lot of runners in defense names in different positions. Below I posted some names of interest. I have the charts marked up without comment to make sure you take the time to make your own plan depending on your trading style and timeframe. How I see them doesn’t necessarily fit your needs, so take this as a starting point.

This week was a little different as I was writing most of this after the markets opened versus using all weekend data. The site data is from the weekend, but all the stock charts had today’s showing from when I grabbed them. Some are set up more for longer term positions and others for shorter term trades or even potential pullback spots to watch. These are just scratching the surface, there are a lot of great looks all over the markets. I hope you use the site and the information above to help find the fishing lane you are looking for.

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!