Decoding Recent Sector Moves (+How To Potentially Profit)

2023年9月11日

This year, there have been some big sector moves that have been relatively easy to trade. Tech, Communications, and Consumer Discretionary have all had strong readings for a while, and they enjoyed strong price trends that were relatively straightforward to follow. These trends led to serious returns.

Now, things seem to be at a pivot point. There's been some interesting changes in sector strength over the last week that we wanted to mention here, as they might be the beginning of big moves to come in other sectors. Positioning around these could lead to some healthy profits. Let's dive in.

First up, let's have a look at where sector strength currently stands:



This week saw weakening in sector strength across the board, but the two largest-impacted areas were Industrials and Healthcare. This huge drop-off in strength is a result of 'bunched up' momentum indicators. Taken through that lens, the week-to-week impact on their scores is much higher than the reality of their price action. Unfortunately, not all models are perfect.

Here's the kicker, though:

While many of the decreases over the last week can be chalked up to a weak overall period for the market, there was one advancing sector: Utilities. We're excited to see this, as our macro view dictates that defensives remain a generally better place to be, given the bearishness expressed by the most important in leading economic indicators.

In a selloff, defensive names should massively outperform; and given the sector's relative strength, we think it's time to look more aggressive in this sector, while laying off some risk in places like Industrials and Technology.

In other words, long bullish Utility stock setups, Short precarious looking tech / industrial names.

We expect that this pairing could have some serious alpha, especially if the market begins to sell off, which it's already looking as though it might (recent stacking of red candles indicating a potential turnaround):



Good luck out there!


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