The major index ETFs are starting off May generally overbought with only the Micro-Cap ETF (IWC) sitting in neutral territory. Ahead of today’s FOMC meeting, most of the major index ETFs are up modestly over the past week with the Russell 2000 (IWM) having risen the most. On the other end of the spectrum, the Nasdaq (QQQ) has fallen 0.4% in the same span of time. Other large caps have also lagged behind with the Dow (DIA) down -0.26% and the S&P 100 (OEF) only up 0.22%. The only other ETF to see a loss in the past week is the Core S&P Mid Cap (IJR). Each of these underperforming ETFs are also coming off of extreme overbought levels, so these declines are warranted.
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Turning to the individual sectors, Consumer Staples (XLP) and Financials (XLF) have become extremely overbought following strong gains over the past week. While both of these sectors have been strong, Utilities (XLU) have been even stronger, bouncing off the 50-DMA in the past week for a 2.28% gain. We have repeatedly highlighted Health Care’s (XLV) weakness in the past month as the sector reached extreme oversold levels. The worst for the sector seems to be over for now as it has moved back into neutral territory. It is still grossly underperforming on a YTD basis, only up 3.18% versus all other’s sectors double-digit returns. Meanwhile, Energy (XLE) has hit a bit of a rough patch having fallen 3.49% in the past five days. After sitting at extremely overbought levels, it has collapsed through the 50-DMA.