Even with declines yesterday, most of the major index ETFs have managed to hold above their 50-DMAs. Six of the fourteen currently sit under this moving average including the Nasdaq (QQQ), Russell 2000 (IWM), and Micro-Cap (IWC).  This comes despite QQQ having the largest gains over the past week (4.85%) while IWC actually has seen the worst performance as the only one of these ETFs to sit in the red. Additionally, IWC is the only major index ETF that is oversold. Perhaps not to the same degree, but this weakness is being shared with other small caps as IWM and the Core S&P Small-Cap ETF (IJR) are teetering on oversold levels and both have seen less than a 1% gain over the past five sessions.

Moving over to the individual sectors, defensives remain broadly overbought with Consumer Staples (XLP) and Real Estate (XLRE) sitting at extreme levels even as they have not necessarily been the best performing sectors in the past week.  XLP has been strong with the third best gains of all eleven sectors, but XLRE’s performance has been more middling and Utilities (XLU) has actually moved the least in the past week.  Meanwhile, Technology (XLK) has rocketed out of oversold territory, rising 5.45%.  While the move hasn’t been as rapid, Health Care (XLV), a sector which we have repeatedly highlighted the underperformance of this year, has begun to press higher.  XLV has just entered overbought territory and is at an interesting spot from a technical perspective.

In the past several weeks, XLV has made a few higher lows and more recently has begun to break out to the upside. XLV has moved above both its moving averages as well as its downtrend line originating in the fall of last year, although this week it has paused at resistance from early April.  While the past few days’ price action seems like the sector can move lower again, possibly retesting support at the 200-DMA and a recent high around $90, this sort of breakout can be a promising sign for the future of this year’s worst sector. Start a two-week free trial to Bespoke Institutional to access our Trend Analyzer and much more.

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