The Best Five Sectors, #14

This article was first posted on 4/4/2025 and contained only rankings and charts. Then updated with comments 4/7/2025

I am attending and speaking at the CMTA West Coast Regional Summit in San Francisco from Friday, 4/4, to Sunday, 4/6, so I don't have enough time to write a full blog article updating the best five sectors.

So, instead, I have added the graphs and the new ranking to this article for review, and I will update the text and the positions in the portfolio on Monday.

Consumer Staples enters top-5

Financials remain in the lead, Communication Services and Energy trade place two and three, and Consumer Staples enters the op-5 at the cost of Healthcare.

1. (1) Financials - (XLF)
2. (3) Communication Services - (XLC)*
3. (2) Energy - (XLE)*
4. (7) Consumer Staples - (XLP)*
5. (4) Utilities - (XLU)*
6. (5) Healthcare - (XLV)
7. (6) Industrials - (XLI)*
8. (9) Consumer Discretionary - (XLY)*
9. (8) Real-Estate - (XLRE)*
10. (10) Materials - (XLB)
11. (11) Technology - (XLK)

Weekly RRG: Discretionary crossing into lagging quarant.

The rotations on the weekly RRG remain very similar to last week. Only Technology and Consumer Discretionary have negative RRG-Headings, and Discretionary is now crossing over into lagging, once again confirming its current weakness.

The positive headings on the other tails remain, with the exception of the Energy sector (XLE), which bends over slightly and has now moved out of the 0-90-degree angle.

Daily RRG: More Defense

On the daily RRG chart, XLK confirms its weakness by rotating back into the lagging quadrant from improving and doing so at the lowest RS-ratio reading. It's hard to find a weaker rotational move than we currently see in tech.

Energy is rotating out of the leading quadrant and into weakening at a relatively long tail, indicating some power behind this move. This pushes XLE down in the ranking while still inside the top 5.

The strongest moves on this daily RRG are seen for the defensive sectors XLP and XLU. Consumer Staples has already moved into the leading quadrant from weakening, and XLU is on the verge of completing the same rotation.

Consumer Discretionary shows some short-term strength as it crosses into the leading quadrant. However, the weak position and negative RRG-heading on the weekly RRG keep this sector in the lower half of the ranking.

Financials

The sharp move lower on the price chart completed an H&S top formation, which points to a price tart around 42.50, which coincides with the horizontal support level around the same level. It will be interesting to see whether this zone is strong enough to absorb all the downward pressure.

Despite the price decline, this sector's relative strength remains strong, keeping it at the top of the list.

Communication Services

Another big decline is taking XLC below horizontal support and below its rising support line. There is a support zone between 82.50 and 87.50 to watch.

Relative strength remains strong and keeps XLC at the top of the ranking.

Energy

A nasty decline pushed XLE below a two-year rising support line, flipping the sector's risk/reward profile. Upside potential has now become limited, while downside risk has opened up significantly.

Relative strength is still mildly positive but will need a positive impulse soon to remain like that.

Consumer Staples

As a true defensive sector, XLP is holding up very well despite all the recent price declines. This has accelerated the relative strength and pushed XLP into the top 5.

Even from a price perspective, XLP is holding up well. The horizontal level around 7 is the area to watch

Utilities

Like XLP, the Utilities sector is holding up well on the price chart, pushing relative strength higher. XLU is now breaking out of its relative range, suggesting that more relative upside may be expected.

Portfolio Performance Update

The RRG portfolio lost significantly over the last week but remained aligned with the market. At the end of last week (Friday 4/4), the difference was 20 Bps in favor of the RRG portfolio.

#StayALert --Julius