The week started with a wild ride when DeepSeek created a bizarre “deep sink” day in the stock market. NVIDIA Corp. (NVDA) was one of the most actively traded stocks, closing lower by 16.97%. The stock lost $593 billion in market cap, which, according to Barron’s, is the most market value a stock has lost in a single day. There was a lot of talk suggesting the semi-bubble may have burst.

The release of DeepSeek R1, an AI tool that appears to be much more efficient than other large language models caused NVDA’s stock price plunge. This raises questions about the need for expensive hardware that NVDA and its competitors provide. Reduced hardware needs would mean less spending on AI infrastructure, impacting employment and, ultimately, the economy.

Despite the massive selloff in semiconductor stocks, other areas didn’t feel as much pain. The Dow Jones Industrial Average ($INDU) closed higher, the S&P Equal Weighted Index ($SPXEW) closed up 0.02%, and seven of the 11 S&P sectors closed in the green. The top-performing sectors were Consumer Staples, Health Care, and Financials (see image below). Out of the Mag 7 stocks, Meta Platforms (META), Apple (AAPL), and Amazon (AMZN) closed higher. These companies would benefit greatly from the implementation of AI tools.

However, Monday’s selloff may have been overhyped because, on Tuesday, the narrative shifted. The chart below shows how the S&P 500 ($SPX) bounced off its 21-day exponential moving average (EMA).

FIGURE 1. S&P 500 BOUNCES BACK. A bounce off its 21-day EMA and improving breadth suggests the S&P still has legs.Chart source: StockCharts.com. For educational purposes.

Interestingly, the NYSE New 52-week highs outnumbered the New 52-week lows on Monday. This should have indicated that Monday’s selloff could be a short-lived overreaction.

Overall, the uptrend in the S&P 500 has not suffered much harm, but considering it’s close to its top, a little hesitancy to continue higher is healthy.

The Nasdaq Composite still has a little work to do before confirming its bull trend. An upside follow-through and improving breadth would confirm a bullish trend (see chart below).

FIGURE 2. NASDAQ COMPOSITE NEEDS A LITTLE MORE UPSIDE FOLLOW-THROUGH. Improving breadth indicators and a continuation to the upside would confirm the Nasdaq’s bullishness.Chart source: StockCharts.com. For educational purposes.While the index broke above its downward-sloping trendline connecting the lower highs, Monday’s price action broke that trajectory. Investors should look for the Nasdaq to resume an uptrend—a series of higher highs and higher lows. The Nasdaq Composite Bullish Percent Index (BPI) is shy of 50, about 45% of Nasdaq stocks are above their 200-day moving average, and the Nasdaq Advance-Decline Line is still not convincingly bullish. The Nasdaq is still at a crossroads, but it has a lot of damage to overcome.

The Dow Jones Industrial Average ($INDU), which was running behind, has caught up with the other indexes and is getting very close to its all-time high. Its breadth is also strengthening—a respectable BPI of 63.33, a rising Advance-Decline Line, and 25% of Dow stocks above their 200-day simple moving average.

FIGURE 3. DOW JONES LEADS THE INDEXES. The Dow is looking the most bullish of the three indexes.Chart source: StockCharts.com. For educational purposes.

The Bottom Line

Investors should always worry about protecting their portfolios, so it shouldn’t be surprising that negative news sent investors into a panic-selling mode. Profit-taking from a strong stock performer such as NVDA is a natural reaction. After getting slammed beyond belief on Monday, NVDA’s stock price recovered on Friday, closing higher by 8.82%. It hasn’t recovered all its losses, but Tuesday’s move is encouraging.

Wednesday will be an eventful day. There’s the Fed meeting and Tech earnings are in full swing. Microsoft Corp. (MSFT), Meta Platforms (META), and Tesla, Inc. (TSLA) report quarterly earnings after the close. META closed at an all-time high, MSFT closed higher and recovered from Monday’s loss, and TSLA closed slightly higher. Will the upward move continue?

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.

While StockCharts offers numerous tools you can use to find top stocks or top-gaining stocks, I decided to focus on an Outperforming SPY: 3-Month Relative Highs scan to see if I can find a few resilient stocks in early-stage trends, especially after Monday’s huge market rout.

FIGURE 1. THE OUTPERFORMING SPY SECTION OF THE PREDEFINED SCAN GROUP.  I went with the first scan to find stocks that outperformed SPY over three months.Image source: StockCharts.com. For educational purposes.

What I found were two cloud-based tech stocks at different trend stages: Snowflake (SNOW) and Twilio, Inc. (TWLO). It turns out that both were garnering attention on Wall Street due to their recent earnings performances:

• SNOW surged late last year on strong financial performance and strategic AI advancements.
• TWLO’s jump to an all-time high can be attributed to several analysts recent “buy” ratings and upward price target revisions, following the company’s strong earnings results and guidance.

Also, note that both stocks have a StockChartsTechnicalRank (SCTR) above the 90 line, indicating extreme bullishness across multiple technical indicators and timeframes.

FIGURE 2. RESULTS OF THE SCAN. When you run a scan, consider categorizing stocks by volume to list the most liquidly traded stocks from the top down.Image source: StockCharts.com. For educational purposes.

While outperforming SPY, an S&P 500 proxy, points to recent developments in the stock, it’s always good to get a bigger-picture view of relative performance. In light of this notion, take a look at a one-year chart illustrating relative performance between $SPX, SNOW, and TWLO.

FIGURE 3. PERFCHARTS RELATIVE PERFORMANCE OF SPY, SNOW, AND TWLO. This gives you a one-year perspective on the relative outperformance and underperformance of the two stocks.Chart source: StockCharts.com. For educational purposes.

This adds more depth to the comparison. It also makes you wonder if TWLO and SNOW are overvalued and undervalued, respectively, relative to the S&P 500 on a purely technical basis.

With that in mind, let’s start with a daily chart of SNOW.

FIGURE 4. DAILY CHART OF SNOW. Note the conflicting volume-based indicators. You’ll need to analyze this divergence to get a clearer set of possible interpretations.Chart source: StockCharts.com. For educational purposes.

SNOW is breaking above resistance (and its most recent swing high) at roughly $187. The nearest level of support can be found at its most recent swing low at the $153 range. Note the significant earnings-driven gap late November; a range it might retest should SNOW’s breakout fail. SNOW’s price momentum has pushed it toward the early stages of an overbought condition, as indicated by the Relative Strength Index (RSI).

If that’s relatively straightforward, the picture presented by the volume indicators is much more confusing. The On Balance Volume (OBV) indicates strong buying pressure, but the Accumulation/Distribution Line (ADL) behind the price suggests a drastic weakening in money flows. What might this mean? Here are a few possibilities:

• Institutional distribution and false strength, or institutional sellers absorbing retail demand.
• Rally or trend exhaustion.
• If price holds above support, it can also indicate hidden accumulation.

Your actionable step: Add SNOW to your ChartLists and track its price movement relative to support and resistance levels. This will help you better understand its potential direction, assuming that it’s supported by momentum and volume.

Now let’s shift over to a daily chart of TWLO.

FIGURE 5. DAILY CHART OF TWLO. Strong breakaway gap, but possibly well-overbought.Chart source: StockCharts.com. For educational purposes.

TWLO experienced a parabolic jump following a breakaway gap just last week. While the OBV underscores the bullish optimism, showing strong buying pressure, the Chaikin Money Flow (CMF) signals that selling pressure is now greater than buying pressure.

Is this another case, similar to SNOW, of retail strength buying into institutional selling? Or will accumulation continue once TWLO has pulled back? After all, the RSI is signaling overbought conditions, and TWLO is well above the upper Bollinger Band.

For now, add TWLO to your ChartLists and wait for it to pull back to the middle Bollinger Band. If you’re bullish on TWLO, such a pullback would present a strong buying opportunity as long as price doesn’t fall below $105, the bottom level of the month-long congestion range.

At the Close

SNOW and TWLO have shown strong relative performance and bullish momentum, but conflicting volume indicators suggest caution. Monitoring key support and resistance levels, along with volume and momentum, will provide better clarity on their next moves. Keep them on your ChartLists and monitor them for confirmation before taking action.

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.

Trade tariffs have been hogging the headlines since last year, and have been a sticky debate point heading into the 2024 US elections. With newly-elected US President Donald Trump in office, the fear of tariffs is front and center in investors’ minds.

On his first day in office, President Trump shied away from slapping tariffs, which provided some relief to investors and was reflected in the stock market’s price action. However, later in the day, Trump said he would impose tariffs on Canada and Mexico on February 1.

If history is any indication, tariffs have been a drag on the US economy and have had a negative impact on the stock market’s performance. As an investor, your primary goal is to protect your portfolio from large drawdowns. To achieve this goal, you’ll need to regularly monitor the stock market’s price action.

Tariff Talk

Tariffs can be both beneficial and detrimental to the overall economy. The general consensus is that they will increase the prices of imported goods, which will hurt consumers. On the other hand, they can increase domestic production and make the US economy more profitable, resulting in higher wages and increased domestic consumption.

The effects of tariffs on the US economy will take years to unravel, but the stock market reacts instantly. The lack of tariff slaps on day one of Trump 2.0 sent the broader stock market indexes higher. The S&P 500 ($SPX) closed at a new high on January 23. The Nasdaq Composite ($COMPQ) and Dow Jones Industrial Average ($INDU) are approaching their all-time highs.

The Market Overview panel on the StockCharts Dashboard gives you a bird’s eye view of equities, bonds, commodities, and cryptocurrency markets.

Learn more.

But what if President Trump indeed slaps tariffs on Mexico and Canada on February 1? Will this benefit or hurt the US economy? It could go either way, which is why investors should monitor the US’s performance relative to other countries.

Domestic or International Stocks?

The US economy is strong, corporate earnings are solid, and investors are complacent. However, the implementation of tariffs could change the narrative, which is why investors should monitor the US market’s performance relative to the rest of the world.

The chart below provides a comprehensive overview of the US market’s performance compared to the rest of the world over three years. The top panel displays the performance of the Vanguard Total World Stock ETF (VT), Vanguard Total Stock Market ETF (VTI), and Vanguard Total International Stock ETF (VXUS). The middle panel compares the US market’s performance to the world’s, and the bottom panel compares the US market to international stocks.

FIGURE 1. WEEKLY CHART OF THE US STOCK MARKET VS. THE REST OF THE WORLD. The US stock market, represented by VTI, is the outperformer, over three years.Chart source: StockCharts.com. For educational purposes.

A glance at the above chart shows US stocks are outperforming international stocks. If this reverses, then it’s time to reevaluate your portfolio and decide whether you want to allocate your assets across global stocks.

There are several international indexes and exchange-traded funds (ETFs) available in StockCharts.

A good starting point is to download the StockCharts Essentials ChartPack.

In addition to monitoring relative performance, investors should keep an eye on the US dollar. A strong dollar indicates the US economy is performing well relative to other countries. The daily chart of the US Dollar Index ($USD) shows the US dollar continues to be resilient, despite its pullback after peaking on January 13, 2025.

FIGURE 2. DAILY CHART OF US DOLLAR VS. CANADIAN DOLLAR AND MEXICAN PESO. Keep an eye on the strength of the US dollar relative to the Canadian dollar and Mexican peso.Chart source: StockCharts.com. For educational purposes.

The lower panels display the US dollar relative to the Canadian dollar and Mexican peso. As of this writing, the US dollar retains its strength, although it’s moving sideways relative to the two currencies.

Canada and Mexico could be the first countries to face tariffs. When Trump didn’t mention tariffs when he was signing executive orders, the Canadian dollar rose, but later in the day, as it was announced that Canada would be slapped with tariffs on February 1, the Canadian dollar lost ground. Monitoring the performance of the respective currencies relative to the US dollar can reveal strengths or weaknesses in the US economy.

The US is the world’s largest importer of manufactured goods. If tariffs are imposed, many sectors and industries will get caught in the trenches of the trade war, some experiencing a greater impact than others. Which sectors could get hit the hardest?

Sector Watch

Assuming Trump enforces his proposed tariffs on imports from China, Canada, and Mexico, the sectors that will bear the brunt are Technology, Materials, Industrials, and Consumer Discretionary.

Technology

Tariffs are only going to be applied to components manufactured in other countries. Semiconductor and hardware companies could be affected, but those that rely mostly on cloud services or ad revenues may not see significant changes.

Materials

The US depends on Canada and Mexico for many resources, such as aluminum, zinc, copper, and nickel. These are used to produce aircraft, home appliances, medical equipment, and home construction. Manufacturers will face higher costs if 25% tariffs are implemented.

Industrials

The US imports automobiles and light-duty motor vehicles, motor vehicle parts, heavy-duty trucks and chassis, and motor vehicle electrical and electronic equipment from Mexico and Canada. The US consumer will be faced with higher automobile prices if tariffs are implemented.

Consumer Discretionary

If tariffs don’t increase domestic production, then the US consumer will face higher prices. As a result, consumption will decline for discretionary items such as new cars, home appliances, and consumer electronics.

The PerfCharts tool in StockCharts helps you monitor which sectors are outperforming and which are underperforming. The chart below shows the performance of Technology, Materials, Industrials, and Consumer Discretionary sectors over one year.

FIGURE 3. PERFORMANCE OF TECHNOLOGY, INDUSTRIALS, MATERIALS, AND CONSUMER DISCRETIONARY SECTORS. Over the past year, Consumer Discretionary is in the lead, up 34.34%. Will it maintain its lead if tariffs are imposed?Chart source: StockCharts.com. For educational purposes.

Consumer Discretionary is leading the pack, but, if tariffs are imposed, it could lose its lead. If your portfolio is overweighted in stocks in this sector, it may be time to reallocate your assets among different sectors.

The Bottom Line

During President Trump’s first term, the stock market declined after tariffs were announced. That doesn’t mean a similar scenario will take place this time. With the uncertainty surrounding tariffs, investors need to prepare for any scenario to surface.

Be sure to follow the stock market by monitoring the broader indexes, the performance of the US market relative to the rest of the world, the US dollar’s strength, and sector performance. Staying abreast of stock market action will help you identify investor sentiment changes, which, in turn, will help position your portfolio for success.

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.

The market opened with a bang as news of a cheaper Artificial Intelligence program, DeepSeek out of China. It has spurred investors to rethink the overbought Technology space, AI in particular. NVDA was down over 17% and other high profile AI companies also suffered.

Carl reviewed the DP Signal Tables to see where we stand on our 26 indexes/sectors/industry groups we follow. Utilities (XLU) was due for a Silver Cross BUY Signal, but with today’s steep drop, it will not materialize.

Carl also gave us his insight into the long-term condition of Bonds over the past 80 years and how he sees the current breakdown resolving.

The market overview was especially interesting with today’s decline. Carl walked us through all of the DecisionPoint primary indicator charts and discussed his outlook for the market in general. He then went into Bitcoin, Crude Oil, Dollar, Gold and more.

The Magnificent Seven overview walked us through the clear danger on many of the charts, but not all were suffering on today’s loss. Apple (AAPL) was certainly a surprise.

Erin took over with an insightful look at sector rotation. The market may be struggling, but internals aren’t that bad as we see rotation into Consumer Staples and Healthcare rather than a complete rush to the exits.

She finished the trading room with a look at viewer symbol requests that included LI, RIVN, HD and more.

01:02 DP Signal Tables

03:47 Long-Term Bond Discussion

06:20 Market Overview

17:45 Magnificent Seven

25:15 Questions

25:55 Sector Rotation

39:38 Symbol Requests

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Technical Analysis is a windsock, not a crystal ball. –Carl Swenlin

(c) Copyright 2025 DecisionPoint.com

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.

DecisionPoint is not a registered investment advisor. Investment and trading decisions are solely your responsibility. DecisionPoint newsletters, blogs or website materials should NOT be interpreted as a recommendation or solicitation to buy or sell any security or to take any specific action.

Helpful DecisionPoint Links:

Trend Models

Price Momentum Oscillator (PMO)

On Balance Volume

Swenlin Trading Oscillators (STO-B and STO-V)

ITBM and ITVM

SCTR Ranking

Bear Market Rules

In this video, Dave reviews the VanEck Semiconductor ETF (SMH) from a technical analysis perspective. He focuses on the recent failure at price gap resistance, the breakdown below price and moving average support, and the frequent appearance of bearish engulfing patterns which have often indicated major highs over the last 12 months.

This video originally premiered on January 27, 2025. Watch on StockCharts’ dedicated David Keller page!

Previously recorded videos from Dave are available at this link.

In this video, Tony gives a macro review of where we currently stand with the broader markets given the impact of DeepSeek on the AI space. He then shares some trade ideas for the week, including NVDA, META, LULU, DIS, & AAPL.

This video premiered on January 27, 2025.

“An investment in Knowledge pays the best interest.” — Benjamin Franklin

It’s time to revisit a few timeless lessons regarding extended markets.

As I write this, the last correction of any significance was in 2022. The past two years have been one heck of a dance if you chose to accept an invitation. For those of you attending, I remind you to remember your appropriate dance steps and keep your shoes shiny and polished or you’ll be asked to leave.

There’s perhaps no better way to achieve these objectives than revisiting the two stock market classics pertaining to frothy markets. I recommend reviewing two books, both entertaining and insightful:

• Charles Kindleberger’s book Manias, Panics and Crashes: A History of Financial Crises (7th edition)
• Charles MacKay’s book Extraordinary Popular Delusions and the Madness of Crowds

I have some personal observations I like to keep in mind on this topic.

1. Major corrections are more a state of mind than a numeric calculation. It’s not all about the numbers.
2. Alan Greenspan called it “irrational exuberance” that’s the sister of “FOMO”, which represents investors’ Fear of Missing Out. Smaller profits are better than big losses.
3. When my grocery clerk and postal carrier corral me to talk about equities, my radar flashes.
4. Sir John Templeton said, “The four most dangerous words in investing are: it’s different this time.” When the press is bursting with stories about the “New New Thing” — be it cryptocurrency or AI — my antenna stands tall. Hearing the cliche “it’s different this time” conjures up memories of the tech top in 2000, which many of us lived through.
5. A good example is Nvidia (NVDA), on its towering popularity pedestal. I ask myself what might the unknown hazards and hidden future fractures be? Most certainly, the craters will reveal themselves over time. I’m paying attention. Will Nvidia profits truly grow for decades and competitors be kept at bay? As Carlos Slim Helu explained, “with a good perspective on history, we can have a better understanding of the past and present and thus a clear vision of the future.”
6. Change is the DNA and indeed the lifeblood of the markets. New competitors will vault over established leaders, new technology will leapfrog existing technology, and today’s darlings will be passed by. Of the top twenty companies in the S&P 500 in the year 2000, only six remain. This change in leadership is to be expected. Fourteen have fallen out of the elite “Top 20” group. “It’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong.” — George Soros.

Always remember the timeless advice of Bernard Baruch, “Don’t try to buy at the bottom and sell at the top; it can’t be done except by liars.” The bottom line is this. Keep your trading shoes shiny and remember your essential investing dance steps. By doing so, you’ll enjoy a tremendous party without a hangover.

Trade well; trade with discipline!

Gatis Roze, MBA, CMT

StockMarketMastery.com

• Author, “Tensile Trading: The 10 Essential Stages of Stock Market Mastery” (Wiley, 2016)
• Developer of the “Stock Market Mastery” ChartPack for StockCharts members
• Presenter of the best-selling “Tensile Trading” DVD seminar
• Presenter of the “How to Master Your Asset Allocation Profile DVD” seminar

The Indian equities continued to trade with a corrective undertone as they ended the week on a mildly negative note. Over the past five sessions, the Nifty continued facing selling pressure at higher levels while staying mainly in a range. The markets remained in a very defined trading range and stayed decisively below key levels. The trading range widened a bit; the Nifty oscillated in 449.45 points before closing towards its lower end of the range. The volatility increased; the India VIX inched higher by 6.33% to 16.75 and stayed at elevated levels. While not showing any major reversal attempts, the benchmark index closed with a net weekly loss of 111 points (-0.48%).

The coming week will be a 6-day trading week. Both NSE and BSE shall conduct a special full-day trading session on Saturday, February 1, 2025, on account of the presentation of the Union Budget.

As we commence a new week, it is important to observe that the markets remain decidedly below key levels. The Nifty Index is significantly below its 200-day moving average (200-DMA), which is situated at 23,984. Additionally, a Death Cross pattern has formed on the daily charts as the 50-day moving average (50-DMA) has crossed below the 200-DMA. On the weekly charts, we are also below the 50-week moving average (50-WMA) placed at 23,711. Consequently, even the most robust technical rebounds, should they occur, are likely to encounter resistance around the 23,700 level and higher. In summary, as long as the Nifty remains below the 23,500-23,650 range, it will likely be susceptible to profit-taking at elevated levels.

The levels of 23325 and 23500 are expected to act as potential resistance points in the coming week. The supports are at 22900 and 22650.

The weekly RSI is 40.71. It stays neutral and does not show any divergence against the price. The weekly MACD is bearish and trades below the signal line.

The pattern analysis of the weekly charts shows that the Nifty is now decisively below the 50-week MA at 23711. This means the key resistance level has been dragged lower to this point, even from a medium-term horizon. As evidenced on the chart, while the Nifty breached the 50-week MA, it also slipped below the support of the rising trend line pattern.

Overall, the markets will likely trade with a weak undertone over the immediate short-term. We are likely to see ranged markets with weak undercurrents through the week. However, we will likely see immense volatility on Saturday as we head into the Union Budget on February 1. The markets may see some risk-off sentiment playing out; this is likely to see the traditionally defensive sectors like IT, Pharma, FMCG, etc., doing well. We will also see some Budget-driven movement in a few select pockets. The markets shall fully digest the Budget the week after this one. It is strongly recommended to be very light on positions and keep leveraged exposures at modest levels. A highly cautious view is advised for the coming week.

Sector Analysis for the coming week

In our look at Relative Rotation Graphs®, we compared various sectors against CNX500 (NIFTY 500 Index), which represents over 95% of the free float market cap of all the stocks listed.

Relative Rotation Graphs (RRG) show a lack of leadership in the sectoral setup. The Nifty Realty, Banknifty, Financial Services Index, and the Midcap 100 Index are inside the leading quadrant. Except for the Midcap 100 Index, the rest are showing a decline in their relative momentum. However, these groups are likely to outperform the broader markets relatively.

The Nifty IT index has rolled inside the weakening quadrant. However, stock-specific performance may be seen from this space. The Nifty Pharma and the Services Sector Indices are also inside the weakening quadrant.

The Nifty Metal, Media, PSE, Energy, FMCG, Consumption, and Commodities Indices are inside the lagging quadrant. Most of these sectors are showing sharp improvement in their relative momentum.

The Nifty Auto has rolled inside the improving quadrant, and the Nifty Infrastructure and PSU Bank Indices are also inside the improving quadrant. However, the PSU Bank Index is seen sharply giving up on its relative momentum.

Important Note: RRG™ charts show the relative strength and momentum of a group of stocks. In the above Chart, they show relative performance against NIFTY500 Index (Broader Markets) and should not be used directly as buy or sell signals.  

Milan Vaishnav, CMT, MSTA

Consulting Technical Analyst

www.EquityResearch.asia | www.ChartWizard.ae

In this video, Mary Ellen reviews the new uptrend in the S&P 500, and highlights what’s driving it higher. She then shares new pockets of strength that are poised to take off, and what to be on the lookout for ahead of next week’s M7 earnings reports.

This video originally premiered January 24, 2025. You can watch it on our dedicated page for Mary Ellen’s videos.

New videos from Mary Ellen premiere weekly on Fridays. You can view all previously recorded episodes at this link.

If you’re looking for stocks to invest in, be sure to check out the MEM Edge Report! This report gives you detailed information on the top sectors, industries and stocks so you can make informed investment decisions.

No changes in the top-5

At the end of this week, there were no changes in the ranking of the top-5 sectors.

1. (1) XLY – Consumer Discretionary
2. (2) XLF – Financials
3. (3) XLC – Communication Services
4. (4) XLI – Industrials
5. (5) XLE – Energy
6. (6) XLK – Technology
7. (7) XLU – Utilities
8. (11) XLB – Materials
9. (8) XLRE – Real Estate
10. (9) XLP – Consumer Staples
11. (10) XLV – Health Care

In the bottom of the ranking, a few changes are showing up.

Materials rose from #11 to #8. XLRE dropped from #8 to #9. And XLP and XLV both dropped one position to #10 and #11.

As a refresher, this ranking is done based on a combination of RRG metrics on both the daily and the weekly RRGs.

Based on the positions of XLE and XLK on the weekly RRG, it may seem strange that XLE is above XLK. However, looking at the daily RRG, it can be seen that XLE made a huge move into and through leading with a very high RS-ratio and RS-momentum reading, which dragged the sector above XLK.

Consumer Discretionary

XLY has put a new higher low into place which underscores the current strength of this sector. The newly formed low at 218 is now the first support level to watch for XLY.

The first target to the upside is the level of the previous peak around 240. The uptrends in both price and relative strength are still intact.

Financials

The Financials sector now also has a new higher low in place at 47, which should also be seen as the first support level for XLF.

51.6 is the first target and resistance level on the upside. An upward break will unlock more upside for financial stocks.

Communication Services

Out of the top-5 sector charts, XLC is probably the strongest.

This week’s upward break out of the flag-like consolidation pattern must be seen as very strong and the signal for a further rally. Taking out the previous high at 102.40 will be the confirmation.

Industrials

XLI continues its bounce of support and is underway to the upper boundary of its rising channel. Intermediate resistance is expected around 144.

Relative strength remains under pressure but is still stronger than the other sectors and therefore keeping XLI inside the top 5.

Energy

Energy dropped back a bit after its rally in the last few weeks but remains solidly in the middle of its range. Here also relative strength remains under pressure.

Performance

As of the close on 1/24 the top-5 portfolio gained 3.89%, keeping up with SPY which gained 3.99% over the same period.

#StayAlert, and have a great weekend. — Julius