Chart of the Day – Friday, May 10, 2024

Defensives, especially utlities, have been catching a buzz. However, they remain in a downtrend relative to $SPY.

Broad equities may need to grind a bit more, but look very constructive over the summer. https://t.co/yIdRlWcClP pic.twitter.com/7sMKvjtk1r

— Brian G (@alphacharts) May 10, 2024

Today’s Chart of the Day was shared by Brian G (@alphacharts).

• Defensive leadership has threatened the bull case recently. The chart shows the relative strength of three defensive sectors – Health Care ($XLV), Utilities ($XLU), and Consumer Staples ($XLP) relative to the S&P 500 ($SPY).

• Utilities and Staples are the only positive sectors in Q2, gaining +8.6% and +1.7%. Utilities finally snapped a seven-day winning streak today, while Staples are just starting to break out.

• Despite their recent outperformance, Brian points out that defensive sectors are still trending lower relative to the S&P 500. Utilities are bouncing from an all-time low, while Staples are bouncing from a 24-year low (on a relative basis). Both ratios are approaching resistance from the 2021 low.

The takeaway: Defensive leadership has cast a bearish shadow on the broader market. However, at this point, it’s nothing more than a counter-trend rally within a long-term downtrend. Even a dead cat will bounce if it falls from a great enough height.