Week 2 SPX Sectors Review
We saw the bullish trending of the S&P 500 yesterday in my note. Now I want to review the individual SPX sectors.
First the trending heat map. Except for the Healthcare and Consumer Staples sectors, every other sector improved on their trending. There are 4 out of the 11 sectors that are perfectly bullish - Industrials, Financials, Energy and Materials.
The Consumer Discretionary sector XLY has turned short-term bullish, and the price has also crossed over the 50-day moving average.
The Healthcare sector XLV price crossed over the 10-day and 20-day moving averages. However, XLV seems to be still rolling over from a bullish trend.
The Utilities sector XLU price turned short-term bullish.
The Real Estate sector XLRE price turned short-term bullish.
The Consumer Staples sector XLP price trending looks sluggish. The price was trending bullish and now seems to be rolling over.
The Technology sector XLK price has turned short-term bullish, and the price has also crossed over the 50-day moving average.
The Industrial sector XLI price continues to trend perfectly bullish.
The Financials sector XLF price continues to trend perfectly bullish. (I hold XLF call options).
The Energy sector XLE price crossed over the 50-day moving average and turned perfectly bullish again.
The Communications sector XLC continues to trend short-term bullish.
The Materials sector XLB turned perfectly bullish.
Here are the returns over different time periods:
We can see the weakness in the Healthcare XLV and Consumer Staples XLP sectors from the above table. That confirms the trending we saw above. I will review some of the other sectors in greater detail to assess which one are potential good trades.
Let’s look at the week-over-week returns:
Most sectors look good for trades to be executed on them. The only caution I have is that the markets in general now have had between 6 - 7 days of up days. Some of these have been straight up days. So, it would be a prudent strategy to wait for a small pullback in the next day or so.
I sold my SPY and QQQ call options Friday at close to manage the risk of the pullback that I expect. I do think the pullback will be a small one and intend to get back in on the long side quickly.
There is a good chance that the expected December bounce happens in January. We have seen proof of that in the first 2 weeks of December already. From a sentiment perspective, the markets could have discounted more than necessary on poor earnings expectations. And, what we saw immediately after the big Banks earnings releases, could be repeated with other sectors as well.
I will review some of the sectors in more detail between today and tomorrow to be ready for the shortened trading week coming up. Stay tuned.