Last week's sector update showed bullish short-term trending among most of the sectors, but stressed that this could be part of a topping process dating back to the momentum highs of September. We did indeed see a pullback in the market since then, with all sectors losing Technical Strength (a proprietary measure of short-term trending) from the week previous.
Indeed, if you click on the chart above, you can see that almost all of the sectors have reverted to a neutral trend status. Recall that Technical Strength varies from +500 (strong uptrend) to -500 (strong downtrend), with neutral readings between -100 and +100. Here is how the sector readings looked as of Friday's close:
MATERIALS: -80
INDUSTRIAL: 20
CONSUMER DISCRETIONARY: 40
CONSUMER STAPLES: -20
ENERGY: 260
HEALTH CARE: -20
FINANCIAL: -160
TECHNOLOGY: 60
INDUSTRIAL: 20
CONSUMER DISCRETIONARY: 40
CONSUMER STAPLES: -20
ENERGY: 260
HEALTH CARE: -20
FINANCIAL: -160
TECHNOLOGY: 60
The pattern of strength and weakness is similar to what we saw with the data charted earlier, illustrating the percentage of stocks within each sector trading above their 20-day exponential moving averages. Energy stocks lead the pack in relative strength, with relative weakness among financial shares.
The fact that so many of the sectors are trading in neutral trending modes reflects the fact that we are in a multiday trading range. I thought Friday's early action was noteworthy, in that the market could not work higher on positive earnings news and housing data. I also thought it was noteworthy that the selling on Friday could not take out the Thursday lows.
I will be watching the trend, momentum, and strength data each day and publishing the indicator readings before the market open via Twitter (follow here) to gauge the odds of breakout from this significant range.
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