SPDR Sector Relative Performance Review

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Tickers discussed: SPDR Sectors

The SPDR Sector Relative Performance Review compares Sector Performance against SPY.  Understanding relative performance will help traders focus on the right sectors at the right time. Timely commentary is provided to keep you on the right side of the trade.

About Relative Performance

Below you’ll find charts of each SPDR Sector against the benchmark SPY index. Understanding relative performance is an important tool in determining which sectors to favor and which to avoid. While you may be able to find a stand-out stock within a poorly performing sector, most of the time, birds of a feather flock together.  When tech runs, the majority of stocks within tech will participate ( A rising tide lifts all boats ).  Keep in mind, relative performance isn’t the same thing as absolute performance. In a bear market, you’ll have “outperforming sectors” going down, but just not down as much as others.

A word about charting relative performance

On the charts below you’ll see trend lines along with support and resistance levels identified. The same technical principles that one would apply to price charts apply the same way to these ratio charts. Performance ratios break out, break down, hit resistance and support just like price. The technical analysis is exactly the same.

15 day Sector Rotation

Here is a graphical representation of the sector rotation over the last 15 days. You can see XLF, XLI, and XLRE zooming from the lagging quadrant to the leading quadrant in short order.  You can also see XLB and XLY move from weakening back to leading.  THis all confirms the rotation into cyclicals vs tech which was the prior leader.

SPDR Sector Relative Performance

XLB – Materials

Not my favorite sector but managing to outperform over the past few weeks. THe problem lies in the big overhead resistance just above. If the ratio can break through, it should have room to run.

XLC – Communications

Choppy graph here mostly because of the outsized influence of $FB and $GOOGL. You can see the break out and subsequent out performance but then backing off as money flowed out of tech and into cyclical sectors.

XLE – Energy

THe ratio is breaking higher from a bullish ascending triangle. Lots of room to run before the 200ema and lateral resistance come into play. The oil services group within energy have been doing lots better lately as have the refiners. If you believe the cyclical rotation continues, dive into energy and watch this ratio for continued upward travel.

XLF – Financials

The financials put in a nice divergent low that signaled a pending trend shift. Banks have been rockin but from an admittedly pathetic low level. Lots of overhead resistance to grind through above, but as long as the ratio holds the 50ema and can punch through the first real level of resistance, no reason they can’t advance further. .

XLI – Industrials

Like financials, industrials put in a nice divergent low that set the stage for a reversal. XLI is dominated by $BA and it’s been doing well lately. The ratio still has running room before resistance comes into view.

XLK – Technology

Although the hot money has been flowing into XLF, XLI etc, you can see XLK has been the clear winner over time. If you are loaded with FAAMG and other tech names, be concerned if the ratio breaks trend and drops below the first level of support. This will be a big clue that money is actually coming out of the sector.

XLP – Staples

Staples have been in the doghouse in relative terms as the market flipped from defensive to offensive after the March lows. That said, the ratio is at the bottom of its 2 year range. In stock trading school many teach buy low- sell high. If the market looses it lustre and begins to roll over, you’re sure to see staples come off the floor. Keep an eye here for an early summer reversal.

XLRE – Real Estate / REITs

Nice example of what we were talking about on XLP. XLRE hit the floor of it’s 2 year range and is not putting in a nice bounce. I don’t do much in XLRE land, but if you’re into REITs for divvy’s this ratio will help you know when its a good time to either accumulate or peel off winners.

XLU – Utilities

A classic risk off or yield hunter asset. Peaking at max market bearishness and then cratering at max bullishness. Like XLP, watch for a early summer reversal if the market gets punky.

XLV – Healthcare

Healthcare did a moonshot in March but has since been trading in a wide choppy range. Just recently the ratio has dropped below the recent range. If you’re a subscriber, you’ve likely noticed heatlhcare at the bottom of many of the recent sector performance reports. As it stands, healthcare is vulnerable to further relative performance deterioration. Needs to hold in here.

XLY – Discretionary

With AMZN nearly 25% of this sector, this chart is largely tracking how well Amazon is doing. You can see we are at the top of the range. From a technical viewpoint, I’d expect XLY to back off and XLP make some inroads. We are as high as this ratio has been in the past 2 years. For a more balanced look at retail, traders can do a ratio chart of XRT vs SPY. XRT is the equal weight retail ETF. It will eliminate the over-weight of AMZN in the XLY sector and possibly give you a clearer look at how the sector is doing.

BONUS Relative Performance  Coverage

$XLY vs $XLP

Comparing Consumer Discretionary vs Staples gives us a good look into the offensive or defensive nature of the market. If the ratio is rising, it favors XLY / Rick – on market. Declining favors risk off. From the chart we see the ratio is overbought and at resistance. Not reasons to sell XLY but reasons we may see staples re-assert themselves over the weeks ahead.


Another risk on / Risk off ratio we can look at is transportation vs utilities. A rising chart indicates a risk-on market environment.   The rotation into cyclicals really benefiting this ratio as airlines, truckers and other components of $TRAN have stepped up their game. Use the trend line as a guide going forward. As long as the ratio holds trend,

$XBI vs $IBB

The Small cap biotech ETF ( $XBI ) and the large cap biotech ETF ( $IBB )  are great ways to play bio’s to eliminate the single stock risk and to simply play the sector. But which one should you choose?  A rising chart favors XBI. You can see that since the turn in March, XBI has been outperforming.  A break back below support at around 0.75 would indicate that IBB is performing better on a relative basis.


Pulling it all together

Knowing the relative performance trends of the sectors, at the very least, informs you where to focus your attention and which sectors to avoid. This by itself makes it a powerful tool. If we take the relative performance idea to the next level, once you’ve identified the top performing sectors, you can drill down and compare relative performance of names in the group vs the sector.  In this way you’d find the out-performing names within an outperforming sector.  This whole process forms the basis for “top down” analysis.  MARKET >> Sector >>>> Stocks.  You may even want to look at under performing sectors to look for short ideas. Then you could have both several longs and a couple of shorts in your trading book.

Hope the analysis helps.

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