This May so far has not been the kindest to equities as Friday marked another down week.  With markets facing this selling, investors have been dumping more cyclical sectors for defensives.  As shown in our Trend Analyzer below, Financials (XLF) and Industrials (XLI) saw the worst of last week’s declines as XLF fell the most at 2.18% with XLI not far behind down 1.9%. Technology (XLK) and Consumer Discretionary (XLY) were also notably weak falling over 1%.  As these more cyclical sectors saw sizeable declines, defensives rallied.  The Real Estate sector ETF (XLRE) and the Utilities sector ETF (XLU) rose 1.47% and 1.41%, respectively, as Consumer Staples (XLP) managed to gain 0.77%. This brings all three to firmly overbought levels, whereas XLRE and XLU had actually been neutral only a week ago.  Start a two-week free trial to Bespoke Institutional to access our interactive Trend Analyzer and much more.

Turning to the charts of these sector ETFs, while there may have been declines over the past few weeks, there also has not been any outright collapses.  In fact, most sectors have fallen to, rather than through, logical support levels over the past few weeks.  For example, despite a brief dip below, Materials (XLB) has been trading tightly between March lows and the 200-DMA. Meanwhile, for XLI and XLF, the 200-DMA has acted as support with recent lows bouncing right off of these moving averages.  Similarly, Consumer Discretionary (XLY), Tech (XLK), and Communication Services (XLC) have been hovering around their 50-DMAs in their recent pullback. For XLC and XLY, this recent pullback has also seemed to have found a bottom at the lower end of the sectors’ uptrend channels.  The same cannot be said for XLK which has more distinctively broken through its uptrend.  Defensives, on the other hand, are at the tops of their uptrend channels or are eyeing a new break higher. Continuously weak this year, Health Care (XLV) is still the only sector that has been making consistently lower lows.

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