While the overall equity markets might not have been doing a whole lot over the last week, turning our attention to specific stocks and sectors we can see a different story. Apple has been of great attention lately as it seems to have momentary lost its luster, dropping nearly 9% last week. This of course has had a large impact on the overall technology sector, helping hold it back from clearing its 200-day moving average like seven of the nine S&P sectors have done.
After the run equities have had, taking the S&P 500 past its 200-day moving average, we can take a look at how the nine S&P sectors have performed in relation to their respective 200-day moving averages. So far, all but two sectors have cleared their 200-MA, giving equity bulls some confidence. The two laggards are Technology (XLK) and Utilities (XLU).
With Apple being the largest holding in the Technology SPDR ETF (XLK), making up 17.77% of the ETF as of December 7th, it’s of little surprise what has been holding the tech sector back. What’s interesting is even though XLK has yet to break its 200-MA, it’s also lagging behind in relative performance to the XLU, the Utility SPDR ETF. When the market is in ‘risk off’ mode, as it has been for the last few weeks, it’s not surprising to see the lower-beta sectors (consumer staples, health care, and utilities, for example) lag behind the overall market.
But to see one of the historically leading sectors, Technology, lag behind Utilities is interesting but troubling.
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Going forward if equities continue to rally, we’ll be watching to see which sector(s) the advance is led by. The relationship between XLK and XLU will likely need to shift to keep the bulls in charge. By seeing whether tech or utilities is leading in relative performance, we can get an idea of how much risk traders are taking on during market rallies.
Disclaimer: The information contained in this article should not be construed as investment advice, research, or an offer to buy or sell securities. Everything written here is meant for educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned.
