One Sector Leads as Four Battle 200-day EMAs

The broader market is split, but the weight of the evidence has yet to turn bearish, which means there is a bull market somewhere. Today's report will show the three strongest sectors based on price. Internally, Health Care is the clear leader because it has by far the most stocks in uptrends. Consumer Discretionary is the big laggard, but strength elsewhere is compensating for this weakness.

One Sector Stands Out

The Health Care Select Sector SPDR (XLV) shows the most strength from within. The summary table below ranks the 11 sectors and the S&P 500 by the percentage of stocks above their 200-day EMAs. This is a long-term breadth indicator that measures internal strength or weakness. The higher the percentage, the more stocks in long-term uptrends and the stronger the sector. Some 86 percent of healthcare stocks are above their 200-day EMAs and in long-term uptrends, reflecting broad strength throughout the sector and making healthcare the clear leader.

The blue shading marks SPX %Above 200-day EMA (!GT200SPX) as the benchmark. At 56%, more S&P 500 stocks are in long-term uptrends than long-term downtrends, which means the cup is still half full. Above the S&P 500, we can see Energy, Materials, Staples, Tech and Finance. Over 60% of component stocks in each of these sectors are above their 200-day EMAs, and these sectors show more internal strength than the S&P 500.

Sectors with fewer stocks above their 200-day EMA are lagging. In particular, less the 40% of Consumer Discretionary stocks are above their 200-day EMAs. This is the most economically sensitive sector. Weakness within reflects the uncertainty surrounding high interest rates and high oil prices. Also notice that the Consumer Staples sector is stronger than the Consumer Discretionary sector. This shows a preference for defense within the stock market.

The Health Care SPDR (XLV) and related industry groups warrant our attention. This week at TrendInvestorPro, we covered setups in XLV, two biotech ETFs, the Medical Devices ETF, and the Healthcare Providers ETF. All reports include a video for further insight. Click here to take a trial.

Three Sectors Hit New Highs; Four Battle 200-day EMAs

The next image shows CandleGlance charts for SPY and the 11 sectors with the 200-day EMA (pink). Only three sectors hit new highs in October: the Health Care SPDR (XLV), the Energy SPDR (XLE), and the Technology SPDR (XLK). These are the price leaders (blue arrow lines).

Furthermore, seven of the 11 sectors are above their 200-day EMAs: Materials, Communication Services, Energy, Finance, Tech, Consumer Staples, and Health Care. These seven sectors account for 79% of the S&P 500 with tech weighing 38% and Health Care coming in at 9.5%.

The indicator window shows the PPO(1,200,0), which measures the percentage difference between the close and the 200-day EMA. The PPO for XLV is 12.3, which means XLV is 12.3% above its 200-day EMA. XLE is the price leader at 16.97% and XLK is a respectable 10.51% above its 200-day EMA (blue ovals).

The pink ovals show four sectors battling their 200-day EMAs. XLB turned up this week and moved back above its 200-day EMA. XLC has been battling its 200-day EMA since mid August. XLV moved back above its 200-day EMA over the last two weeks. XLI is consolidating around its 200-day EMA and at a moment of truth. An upturn and break above the early October high would be bullish.

Looking for more opportunities within a leading sector? This week, TrendInvestorPro covered the trends and setups in XLV and ETFs related to biotechs, Medical Devices and Healthcare Providers. We also covered setups in the Industrials and Aero-Defense. Click here to learn more.