The S&P500 trend conditions have continued this week in “NoGo” conditions despite relief rallies. Alex Cole and Tyler Wood, CMT identify intermarket forces including rising rates ($TNX) and a strong US Dollar (UUP) that can provide headwinds to risk assets. This week we again take a closer look at GoNoGo Trend® conditions across sectors that are trending and outperforming. Notably, consumer staples (XLP) and Utilities (XLU) are in “Go” conditions and outperforming US equities ($SPY) on a relative basis. These are characteristically “defensive” sectors of the market and become attractive to investors during periods of weakness across the broad indices.
Alex and Tyler dig deeper into the industry group level within the utilities sector (XLU) to see electricity providers leading relative outperformance. We pull up NextEra Energy (NEE) and Edison (EIX) to showcase these opportunities within the leading industry group of an outperforming sector.
On an educational note, we show an example of bearish divergence and discuss how to interpret such concepts as a sign of trend weakness or exhaustion, not as a trade signal to exit long positions. Using Boston Scientific (BSX) as an example, we can see that Price is our most important indicator for trade decisions, and while momentum waned, the bearish divergence appeared, and we even saw brief negative momentum, that weakness proceeded a gap higher for price action.
Tyler Wood, CMT, co-founder of GoNoGo Charts, is committed to expanding the use of data visualization tools that simplify market analysis to remove emotional bias from investment decisions.
Tyler has served as Managing Director of the CMT Association for more than a decade to elevate investors’ mastery and skill in mitigating market risk and maximizing return in capital markets. He is a seasoned business executive focused on educational technology for the financial services industry. Since 2011, Tyler has presented the tools of technical analysis around the world to investment firms, regulators, exchanges, and broker-dealers.
