For over three months the market has been chopping around and making very little progress. In the process internals have been weakening, a fact that is reflected in the signal table below. In our Decision Point Alert Daily Report we track mechanical timing signals on 27 market and sector indexes. In addition to the broad market indexes, we track the nine SPDR sectors and their equal weighted counterparts, which normally perform differently than the cap-weighted indexes.
Of those 18 sector indexes 10 have switched from buy signals to neutral over the last few months. Four had signal changes today. The technology buy signals that just closed were only 5.5 weeks old and were the result of whipsaw that typically occurs during the topping process.
Let's remember that the sector SPDRs are actually formed by breaking the S&P 500 stocks into nine sector groups. While the S&P 500 is on a buy signal, we can see that it is being supported by only four of the nine sectors -- Consumer Discretionary, Consumer Staples, Health Care, and Utilities. Let's look at those charts, remembering that their current buy signals will be closed when the 20-EMA crosses down through the 50-EMA.
Consumer Discretionary is looking a bit shaky, but the rest of the charts show good separation between the 20/50-EMAs.
Bottom Line: We are seeing a gradual breakdown by sector within the S&P 500. While most of the remaining buy signals will have some durability, there are fewer sectors supporting the index than there are pulling it down.
