High Impact: U.S. Relative Sector Analysis

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To get started, email lester@unum.co.za

*Note Prepared on Friday, 28 March (before the open of the U.S. trading session).

Sector Analysis:

1. Materials vs. SPY:

   • Short Term: Neutral (Hold/Watch)

   • Medium Term: Strong (Buy/Hold)

   • Long Term: Weak (Sell/Avoid)

   • Analysis: The conflicting signals make this sector tricky. The strong medium-term is encouraging, but the short-term neutrality and long-term weakness create uncertainty. Overall, given the short-term's higher weight, a cautious approach is warranted. Consider holding if already invested, but don't rush to buy.

     
     

2. Communications vs. SPY:

   • Short Term: Strong (Buy/Hold)

   • Medium Term: Strong (Buy/Hold)

   • Long Term: Strong (Buy/Hold)

   • Analysis: This sector is consistently strong across all timeframes, indicating a clear buy/hold signal. It's a high-conviction sector.

     
     

3. Energy vs. SPY:

   • Short Term: Strong (Buy/Hold)

   • Medium Term: Strong (Buy/Hold)

   • Long Term: Neutral (Hold/Watch)

   • Analysis: The strong short and medium-term trends outweigh the neutral long-term. This sector appears bullish in the near to medium term, making it a good candidate for buying or holding.

     
     

4. Financials vs. SPY:

   • Short Term: Strong (Buy/Hold) - High Bullish Momentum/Approaching Overbought

   • Medium Term: Strong (Buy/Hold)

   • Long Term: Strong (Buy/Hold)

   • Analysis: Financials are another strong sector across all timeframes. However, the note about "approaching overbought" suggests that while the trend is strong, it might be wise to be cautious about chasing the price too high.

     
     

5. Industrials vs. SPY:

   • Short Term: Neutral (Hold/Watch)

   • Medium Term: Strong (Buy/Hold)

   • Long Term: Neutral (Hold/Watch)

   • Analysis: Similar to Materials, this sector presents mixed signals. The strong medium-term is positive, but the short and long-term neutrality suggests a lack of clear direction. Given the short-term's higher weight, a hold/watch approach is recommended.

     
     

6. Technology vs. SPY:

   • Short Term: Weak (Sell/Avoid)

   • Medium Term: Weak (Sell/Avoid) - High Bearish Momentum/Approaching Oversold

   • Long Term: Weak (Sell/Avoid)

   • Analysis: Technology is consistently weak across all timeframes, indicating a clear sell/avoid signal. The "approaching oversold" note suggests that while the sector might be due for a bounce, the overall trend remains bearish.

     
     

7. Consumer Staples vs. SPY:

   • Short Term: Strong (Buy/Hold)

   • Medium Term: Strong (Buy/Hold)

   • Long Term: Neutral (Hold/Watch)

   • Analysis: This sector is strong in the short and medium term, outweighing the neutral long-term. It's a good candidate for buying or holding, especially for those seeking stability.

     
     

8. Real Estate vs. SPY:

   • Short Term: Neutral (Hold/Watch)

   • Medium Term: Strong (Buy/Hold)

   • Long Term: Neutral (Hold/Watch)

   • Analysis: Similar to Industrials and Materials, Real Estate presents mixed signals. The strong medium-term is positive, but the short and long-term neutrality suggests a lack of clear direction. Given the short-term's higher weight, a hold/watch approach is recommended.

     
     

9. Utilities vs. SPY:

   • Short Term: Neutral (Hold/Watch)

   • Medium Term: Strong (Buy/Hold)

   • Long Term: Neutral (Hold/Watch)

   • Analysis: The pattern is consistent with Real Estate and Industrials. Given the short-term's higher weight, a hold/watch approach is recommended.

     
     

10. Healthcare vs. SPY:

    • Short Term: Neutral (Hold/Watch)

    • Medium Term: Strong (Buy/Hold)

    • Long Term: Neutral (Hold/Watch)

    • Analysis: The pattern is consistent with Real Estate, Industrials, and Utilities. Given the short-term's higher weight, a hold/watch approach is recommended.

      
      

11. Consumer Discretionary vs. SPY:

    • Short Term: Strong (Buy/Hold)

    • Medium Term: Neutral (Hold/Watch)

    • Long Term: Neutral (Hold/Watch)

    • Analysis: The strong short-term trend is a positive signal, suggesting potential near-term gains. However, the neutral medium and long-term trends indicate a need for caution. Consider buying/holding for short-term gains, but be prepared to exit if the trend reverses.

Key Takeaways:

• Strong Buys: Communications and Financials show consistent strength.

• Cautious Buys/Holds: Energy and Consumer Staples are strong in the short and medium term.

• Holds/Watch: Materials, Industrials, Real Estate, Utilities, and Healthcare require a more cautious approach due to mixed signals.

• Sells/Avoids: Technology is consistently weak.

• Short-Term Focus: Remember that the short-term carries the most weight, so prioritize those signals when making decisions.

Lester Davids

Analyst: Unum Capital