Two weeks ago, we noted that compression in the momentum scores often precedes and precipitates massive shifts in ETF relative strength. This week, we can see these compression-induced changes playing out in the rankings. French election results pushed all of Europe higher, Technology moves to the top of the sector rankings, and Momentum continues to be the strongest factor.
Sectors: The relative-strength rankings have a much different complexion today than a week ago. Four sectors jumped three or more places higher, while four others plunged lower, resulting in a clean slate of new occupants in the top-three positions. Technology moved three spots higher to claim the leadership role, Consumer Discretionary followed in lock step, and Industrials surged five places higher to grab the #3 spot. This new trio at the top suggests a bullish scenario with both consumers and businesses being strong, and technology infrastructure spending ensuring long-term growth. Materials also turned in a good showing by posting the largest momentum improvement among the Sector Benchmark ETFs and zooming into the upper half. The recent reign for the defensive sectors was short-lived, as they posted this week’s largest declines in momentum and relative strength. Utilities gave up its top-ranked spot and fell to fourth, Consumer Staples slipped three places lower, Telecom dropped to ninth, and Health Care eased one spot lower. However, it was Real Estate posting the largest drop as it plunged from a tie for first to seventh place. Down near the bottom, Financials had a good week and flipped back to green, while Energy sunk deeper into the red.
Factors: It was a good week for the Factor Benchmark ETFs as all but one posted a momentum increase. Yield was the odd man out, and its failure to improve resulted in a relative-strength tumble to last place. The Momentum factor has been at the top of the chart for seven consecutive weeks now and shows no sign of relinquishing that spot. Growth moved up a notch to grab the #2 spot, while Small Size vaulted six places higher to third. High Beta and Value were slightly in the red a week ago, but they have now erased those deficits.
Leave A Comment