Technology- Equal Weight, Improving

Technology advanced another spot in the DALI sector rankings to the fourth position, showing further improvement but still leaving it with an Equal Weight recommendation. The sector has gained 31 RS signals since February, the most of any sector during that time. Semiconductors continue to show broad strength. Larger names have seen increased demand amid broader market uncertainty and should be the area of focus for those looking to add exposure to Technology. AAPL and PANW each moved to a buy signal this week, demonstrating strength across the various subsectors.

Consumer Cyclical- Equal Weight

Consumer Discretionary moved up to the 5th position within DALI over the past week, its highest level within the sector rankings since February last year. The Consumer Discretionary Select Sector SPDR Fund XLY gained 3.26% over the past week, outperforming SPX by more than 1%. The fund did test support at $136, but ultimately maintained a buy signal and has reversed back into Xs with this week’s action. Nike NKE reported earnings this week, beating estimates, but still cited inventory as a headwind. Overall, NKE’s technical picture is still one that needs further improvement. Textiles/Apparel DWATEXT along with Restaurants DWAREST were among the better-performing subsectors, adding 3.62% and 2.31%. Sketchers SKX is a strong name within the Textiles subsector, while Starbucks SBUX is a 4 for 5’er within the Restaurants space.

Healthcare- Equal Weight

Healthcare moved up to sixth in the DALI sector rankings this week after passing financials and energy. Both financials and energy were poor performers over the last few weeks, so this upgrade in rank has more to do with other sectors weakening and not so much strength in healthcare. While now in equal weight territory, healthcare should still be approached with caution. The Health Care Select Sector SPDR Fund XLV has a fund score of 3.72 but has a negative score direction of 2.15 which speaks to the quick loss of strength in the sector.

Energy- Underweight, Weakening

Energy lost more than 40 buy signals over the last week, falling from fourth to eighth in the DALI sector rankings and now squarely in underweight territory. The Energy Select Sector SPDR Fund (XLE) was down more than 1.6% over the last week, while the S&P was up just over 2%. XLE completed a fourth consecutive sell signal last week and has taken out all support it has found since September. XLE’s fund score remains acceptable but has diminished significantly and now shows a -2.4 score direction. The recent chart action is consistent with a technical breakdown – a series of lower tops and lower bottoms violating multiple levels of support.

Communication Services- Underweight

Communication Services moved up to 10th within the DALI Sector rankings this week, overtaking Real Estate and moving out of the last position for the first time in over a year. The SPDR Select fund for the group XLC now showcases a 3.08 fund score, having put in place localized support on its default chart. One stock to keep an eye on within the sector is The New York Times Company (NYT), a 4/5’er on a productive pair of consecutive buy signals.

Real Estate- Underweight

Real Estate returned to the bottom of our DALI sector ranks last week. SPDR Sector Fund XLRE now carries an abysmal 0.35 fund score, which is marginally better than the Equal Weight Real Estate ETF (EWRE) from Invesco with a score of 0.27. Heavyweights and past leaders in the sector, PLD and SPG, broke key support and have seen deterioration in their attribute rating. Two promising charts are VICI and GLPI.