Most of the S&P500 SPDR sectors have run into resistance going into monthly options expiration (OPEX). If this weakness persists we’d expect June to produce a path lower into the summer months.
Summary
Technology is the largest sector, followed by industrial and financial stocks. Healthcare is also more than 13.4%, so between these 4 SPDR sectors, more than 50% of stocks are affected.
Technology is persistent, rising to resistance this week after testing VBP support weeks earlier. Volume is tapering off as a pivot seems to form.
Healthcare looks similar to the technology sector, as far as relative strength, so we’d focus short-term longs in these two groups.
Financial and Industrial stocks haven’t faired as well. These two SPDR sectors ran into resistance over the past six weeks, producing a cascading pattern of late.
Financial Sector
Financials, and specifically banks, are persistently weak. Considering overhead resistance, these stocks have a lot of work cut out for them. Non-performing loans and credit card debt will undoubtedly be a problem for several quarters unless the economy opens soon.
We’d look to short weaker banks with heavy credit exposure.
Transportation Sector
Transportation stocks had pockets of performance, then Warren Buffett sold all of his airline stocks. That sentiment only adds to investor skittishness and sent this industrial sub-sector lower.
Industrial Sector
Once again, resistance is formidable. RSI is below 50, while volume tapers off. At best, we would look for a higher low in the coming weeks for potential opportunities. Barring a bounce this sector is weak.
If conditions get any worse, we’ll start scaling out of some long-only funds in our retirement accounts and Coverdell, while hedging the remaining funds.
SPY price action is below the 21d. RSI and MACD are lagging but worrisome. Depending on OPEX this Friday, we’ll make more decisions while keeping members assessed to our positioning into the summer months.
On a side note, our position in CODX is up substantially.
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Vinny
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