It’s really hard to imagine how a sector could be doing as bad as the Utilities sector in a tape that has been as strong as this one, but the reality is that when everyone expects rates to increase, they want nothing to do with interest rate sensitive sectors like Utilities. The following charts are from this week’s Sector Snapshots report which looks at the technical and fundamental backdrop for the S&P 500’s major sectors. The report is published every Thursday for Bespoke Premium Clients, so if you don’t already receive it, sign up for a trial today.
Let’s start with the Utilities sector’s price chart. After trading into extreme overbought territory late last year, investors have headed for the exits and taken the sector to its most oversold levels in well over a year. In fact, to find a time when the sector was more oversold than it has gotten in the current leg lower, you have to go back to June 2015.
(Click on image to enlarge)
With the Utilities sector being so weak in an otherwise strong tape, the relative strength versus the S&P 500 has fallen off a cliff. Utilities is not normally a volatile sector, so that makes the recent moves stand out even more. Note in the chart too, how the recent leg lower in relative strength really picked up steam right after the FOMC’s most recent rate hike.
(Click on image to enlarge)
Not surprisingly, breadth for the sector has been weak. Two charts that highlight this are the sector’s 10-Day A/D line which takes a rolling tally of the net number of stocks in the sector rising on a daily basis. As of yesterday, the sector was firmly into oversold territory.
(Click on image to enlarge)
The other illustration of the Utility sector’s pitiful breadth is the percentage of stocks in the sector trading above their 50-day moving average. Currently, that stands at just 11%. Again, this is an extreme reading.
(Click on image to enlarge)
Given the declines, one would think that the sector’s valuation would be starting to look attractive, and while the sector’s P/E ratio has come in pretty significantly from over 19.5 times trailing earnings, it still trades at just over 18 times trailing earnings, which for a little to no growth sector, doesn’t exactly scream buy. That said, from a short-term perspective, the sector should be due for at least a bounce.
(Click on image to enlarge)
Disclaimer: All information, data and analysis contained in the Site or the Service are provided “AS IS” and without warranty of any kind, either expressed or implied. All information, ...
more
Disclaimer: All information, data and analysis contained in the Site or the Service are provided “AS IS” and without warranty of any kind, either expressed or implied. All information, data and analysis provided by the Site or the Service is for informational and educational purposes only and is not a recommendation to buy or sell a security or basket of securities, including but not limited to equities, options and other derivative products, fixed income products, and ETFs. Bespoke believes all information, data and analysis contained in the Service to be accurate, but does not guarantee its accuracy. Under no circumstances, including, but not limited to, negligence, shall Bespoke, any of Bespoke´s affiliates, employees, or other third party data providers be liable to you for direct, indirect, consequential, incidental, special, punitive or exemplary damages even if an authorized Bespoke representative has been advised specifically of the possibility of such damages, arising from the use of or inability to use the Site or the Service, such as, but not limited to, losses, loss of revenue, anticipated profits or lost business. Applicable law may not allow the limitation or exclusion of liability or incidental or consequential damages. In no event shall Bespoke´s total liability to you for all damages, losses, and causes and action (whether in contract or tort, including but not limited to negligence) exceed the amount paid by you, if any, for accessing this Site or using the Service. All opinions expressed on this Site are subject to change without notice, and you should always obtain current information and perform appropriate due diligence before making trades or investment decisions. Bespoke, any of Bespoke´s affiliates, employees, or other third party data providers may have long or short positions in the securities discussed in the Service and may purchase or sell such securities without notice. Bespoke uses various methods to evaluate investments which may, at times, produce contradictory recommendations with respect to the same securities. When evaluating the results of prior Bespoke recommendations or Bespoke performance rankings, you should also consider that Bespoke may modify the methods it uses to evaluate investment opportunities from time to time. For this and for many other reasons, the performance of Bespoke´s past recommendations or investments is not a guarantee of future results.
The securities mentioned in this Site or in the Service may not be eligible for sale in some states or countries, nor be suitable for all types of investors; their value and income they produce may fluctuate and/or be adversely affected by exchange rates, interest rates or other factors. Please view Bespoke’s Form ADV here.
less
How did you like this article? Let us know so we can better customize your reading experience.