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After recapturing both the May lows and the 50-day moving average to the upside in the sector, over 80% of Industrials components are now trading above their 50-day moving average. While the majority of industry groups are exhibiting similar price action, Aerospace & Defense, along with Airlines, have been left behind in the bullish price action. Could this be the beginning of a bearish to bullish reversal for the sector, or just another head fake?

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S&P 500 Industrials 

The Industrials sector has managed to recapture both the 765-resistance zone and the declining 50-day moving average in another bid to turn the trend from bearish to bullish. Note that the declining 50-day moving average provided resistance for the sector in early June. Relative to the S&P 500, the group remains an in-line performer at best, trading below relative resistance and struggling with the ratios declining 50-day moving average.

Aerospace and Defense continue to trade in compression of rising support and falling resistance around a flat 50-day moving average. Relative to Industrials, the group has failed to break out to the upside above the highlighted zone and has lost ground above the ratio’s rising 50-day moving average in a bullish to bearish reversal.

The price action within Building Products closely mimics that of the sector, recapturing the declining 50-day moving average to the upside, above 465-support. Note that the declining 50-day moving average has provided resistance all year long. Relative to Industrials, the group is in the process of a bearish to bullish reversal, testing relative support at the highlighted breakout zone above the ratio’s rising 50-day moving average.

Commercial and Professional Services are heading toward long-term resistance at the 485 zone above a rising 50-day moving average after recapturing the indicator to the upside early in the month. Relative to Industrials, the group remains an outperformer, testing the highlighted breakout zone above the ratio’s rising 50-day moving average.

Transports are consolidating at the flat 50-day moving average after breaking out to the upside during last week’s trading action. Relative to Industrials, the group remains an in-line performer, struggling between the highlighted relative resistance zone and the ratio’s declining 50-day moving average.

Perhaps one of the sloppiest industry trends, Airlines have been the only industry group unable to trade above their 50-day moving average over the past several weeks. Relative to Industrials, the group is heading for a test of relative support at the highlighted zone after finding resistance at the ratio’s declining 50-day moving average.

Road and Rail continue to trade above its declining 50-day moving average for the first time since late March as the group attempts a bearish to bullish reversal. Relative to Industrials, the group trades above long-term relative support at the highlighted zone above the ratio’s declining 50-day moving average.

Breadth

As the sector and the majority of industry groups have managed to recapture their 50-day moving average to the upside, over 80% of Industrials components have done the same in the July 27th trading session, marking the first time since November of last year where this dynamic played out. There were 107 instances since 2009 where the percentage of Industrials components trading above their 50-day moving average crossed above the 80% mark for a median gain in the sector of 3.36%, with a 79.25%-win rate over the following quarter.

This note is a preview of our Thursday Sector Deep Dive. See our thoughts and more in the full report.

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Disclosure: This information is prepared for general information only and should not be considered as individual investment advice nor as a solicitation to buy or offer to sell any securities. This material does not constitute any representation as to the suitability or appropriateness of any investment advisory program or security. Please visit our FULL DISCLOSURE page.