Sectors Signal Caution
Only 7 of 15 sectors assessed are bullish
A closer look at the individual sectors of the broader market provides some cause for caution. Here is the picture:
In this assessment I only looked at the Top 15 SPDR instruments and found only 7 of them to be in bullish territory. Of course this is per my model which looks at short-term moving averages, 1-month returns and few other price related indicators to define bullish, neutral and bearish trending.
It is good that there were no bearish trending sectors per my model. However, the surprising aspect was the combination of Biotech and Healthcare deeply underperforming the markets. In fact Biotech has just been a disaster.
With the rise of oil prices and the crisis of other energy commodities around the world, it is expected that Energy sector will have done well. Still a return of +51% YTD is quite something. Personally I find myself challenged to invest in the traditional energy space anymore.
Also a bit surprising that Financials have done so well over this year. Surprising because with the advance of DeFi (Decentralized Finance) one would think some of the shine of Financials would be dimmed. Not the case so far.
The Homebuilders, Real Estate and Retail could be going through a rotation. They all were going gangbusters earlier in the year - hence have overall strong YTD returns. However, all 3 of these sectors have had negative returns over the last 3 months.
The Technology sector has been quite ordinary this year so far. Usually it leads the market but this time. Still a +19% return is not shabby. We are just starting off the earnings season and the next 2 weeks will be interesting for this sector.