Power Snapshots

June 4, 2024

Highlights:

    • Another Monday gap fades, but this time Large caps hold some gains into the close.
    • Energy was a standout loser on Monday.
    • Consumer Discretionary jumps out as a top performer on Monday and over the last week.

The gap up and fade Monday action returned, but this time the selloff wasn’t as dramatic as last week. $IWM was the only one that stayed red into the close. All are still in their RSI bull ranges with $IWM still with the weakest structure on this level, but holding up ok. Markets were obviously not ready to follow through on Friday’s late day rebalancing surge.

All three continue to chop around in the RSI bear ranges. $IWM came close to a shift on the open, but faded that fast. This leaves things vulnerable to more sideways or downside action. RSI needs to get back over 60 to shift back to RSI bull ranges. Any pullback needs to hold RSI near 40 or we settle in the bear ranges for now which opens us up to more short term downside action.

Definitely a mixed day on the sector front. The big loser was Energy down almost 2.5% with the cap weighted ETFs down more. Industrials also continues to lose momentum and relative strength versus the rest. On the upside, Consumer Discretionary continues to rise back up with a leading day today. Health Care was also a leader on the day with Biotech out front. A rotation there would be timely as Health Care has been lagging since late February as it was one of the first to start consolidating. Communication Services deserves a mention here as well; while not a leader today, it has made a big RS move over the last week as other sectors flounder.

Moving Average breadth is not showing much progress, more stagnant right now. Regional banks are dragging down Financials again while Asset Managers and Brokerage & Capital Markets are improving. I am watching Consumer Discretionary show some of the better progress, but only Apparel & Luxury Goods is pushing into strong trend territory so far. Utilities also remain bid here and keep their top RS rankings. Water being the one space not benefiting.

This is pretty normal here as the markets flop around. Information Technology is starting to get oversold, especially in Software. The sector as a whole is getting oversold in a bull range while Software is showing a deeply oversold CFG with an RSI at 36. Software is also nearing a potential support zone, so it should bounce soon, but how the charts act will be very important on any rebound. This support zone is important for the subsector and probably the sector as a whole since Software is such a big chunk of the Technology sector.

So much for our cleaned up sheet into the weekend. Sellers came back out as the gap higher began to fade.  

Most pressure was on the sell side today. Specialty Retail and then a couple of spaces in Real Estate saw most of the buying pressure. Energy got sold with Crude while Industrials and Financials just took the opportunity to sell and didn’t seem to need an excuse.

On a tougher day like today, New Highs can be very telling. It is pointing right at Consumer Discretionary today. The strength has shown through on a few different measures in today’s report and this kind of seals it.  Go look closer there…

The New Lows were spread around. Energy, Basic Materials, Industrials and Technology all saw a bit of new lows clustering in them. Energy was trying to show some relative strength until this big drop in Crude. The EW Energy sector is holding up decently so far, but the ETFs in the space are seeing bigger hits as the large cap names are taking a lot of the selling here.

The Wrap up

The week started off the same as last week and faded it too, the difference was the close. We held a little better this week with some sectors and subsectors stepping up with buyers. That didn’t happen last Tuesday. This morning looks like we will open with a gap down if things stay how they look now. Energy will be on the weaker side to start. We will just have to see if buyers show up or if we stay in this malaise for a while. It still doesn’t look like aggressive selling to get out of the markets, but more rotation to try and get more out of the markets while they try to find direction.

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As always, I hope this helps!