AAPL has announced a revenue warning due to coronavirus. US equities were mixed in Friday trading, though the S&P 500 ended near the highs of the day. Defensives and Technology were the best performers. Energy, Consumer Discretionary, and Industrials finished lower. Treasuries were stronger across the curve. The dollar was slightly weaker vs the yen and the euro. Gold finished up 0.5%. WTI Crude settled up 1.2%, breaking a big five-week losing streak.
- Outperformers: REITs +1.14%, Utilities +0.65%, Tech +0.49%, Consumer Spls. +0.28%
- Underperformers: Energy (0.81%), Consumer Disc. (0.17%), Industrials (0.06%), Materials +0.06%, Financials +0.08%, Communication Svcs. +0.10%, Health Care +0.13%
S&P futures are down 0.4% in Tuesday morning trading. Coronavirus is the big story after AAPL announced it does not expect to meet its March revenue guidance. Asian markets were weaker overnight, led lower by Japan, Hong Kong and South Korea. Most European markets are lower today. Treasuries are stronger across the curve. The dollar is weaker vs the yen but stronger on the euro cross. Gold is up 0.3%. WTI Crude is down 1.5%.
Key Levels To Watch – SPY
Last week, we raised our near-term support zone for SPY to the $325 – $330 range. The fund is now overbought based on our indicator as it trades near record levels. Given the warning from AAPL last night and the overbought condition of the market, we feel that the best course of action is to be more selective with adding new ideas to the portfolio.
Sector Power Bars
There are currently five sectors with Power Bar Ratios which are stronger than that of the SPY and are bullish. Utilities have regained the top slot followed by Financials and Health Care. Energy remains at the bottom of the list and has a Very Bearish Power Gauge ETF rating.
A Closer Look at Sector Rotation
The Communication Services Sector (XLC) Relative to the S&P 500
The S&P 500 Communication Services sector Relative to the S&P 500 remains in a consolidation zone but is testing the 200-day moving average. The RSI is moving higher and did not become oversold on the recent move lower for the ratio. The trend remains mildly bullish but is under pressure. Trend: Bullish
S&P 500 Consumer Discretionary Sector (XLY) Relative to the S&P 500
The Consumer Discretionary sector remains below the 200-day moving average on a relative basis but has, thus far, held a key support zone. The RSI is moving higher from an oversold position but more time is likely needed for a sustainable move higher to take hold for the sector. Note that AMZN is a large weight in the Consumer Discretionary sector. Trend: Bearish