The major indices closed with nice gains on Wednesday, but well off the highs achieved earlier in the session. The S&P 500 Index (SPX) gained 1.4%, while the Invesco QQQ Trust (QQQ) added 2.1%. So, it shouldn't be hard to tell what sector led – technology. But the bigger technical picture remains troubling, observes John Eade, president of Argus Research.
The Technology Select Sector SPDR Fund (XLK) jumped 3% Wednesday and the rally had broad industry participation. Consumer Discretionary was second, rising 2.4% due to a 5.5% gain in Tesla Inc. (TSLA), while Communication Services added 1.7% on gains in Alphabet Inc. (GOOGL) and Meta Platforms Inc. (META).
Still, chart provider StockCharts has a proprietary system known as SCTR, or the StockCharts Technical Rank. It is a relative strength metric that rates a stock's technical strength against its peers. Stocks are assigned a score based on six key indicators covering different timeframes.
Within the S&P 500, the strongest 10% are ranked from 90 to 99.99, while the weakest 10% are scored from 0 to 9.99. These rankings tell a story that should be obvious to anyone that follows the market closely.
The three highest-ranked sectors are Consumer Staples (88), Utilities (79), and Financials (72). That's certainly not the type of leadership one would prefer and is reminiscent of defensive posturing during an ongoing correction/bear market.
The weakest are Technology (7), Materials (12), and Energy (13). Drilling down, the weakest IT industries are renewable energy (6) and semis (12). While not impossible, it will be tough for strong returns from the majors unless Technology gets off the mat.
