Sector Shuffle: Same Players, New Positions

The past week brought an unusual shake-up in the RRG sector ranking model. While the composition of the top five sectors, and thus the bottom six, remained unchanged, every single position in the entire ranking shifted — a rare occurrence that sets the stage for what’s likely to be another interesting week ahead.

1. (2) Utilities – (XLU)*
2. (5) Communication Services – (XLC)*
3. (1) Consumer Staples – (XLP)*
4. (3) Financials – (XLF)*
5. (4) Real-Estate – (XLRE)*
6. (7) Industrials – (XLI)*
7. (6) Healthcare – (XLV)*
8. (9) Technology – (XLK)*
9. (8) Materials – (XLB)*
10. (11) Consumer Discretionary – (XLY)*
11. (10) Energy – (XLE)*

Weekly RRG

On the weekly Relative Rotation Graph, we’re seeing some interesting movements:

• Staples, Utilities, and Real Estate remain in the leading quadrant, but are losing some relative momentum.
• Financials and Communication Services have moved into the weakening quadrant, but with high RS ratio values and room to potentially curl back up.

Daily RRG

Shifting to the daily RRG, the picture looks a bit different:

• Communication Services stands alone in the leading quadrant, moving with a strong RRG heading.
• Staples, Utilities, Real Estate, and Financials are all in the lagging quadrant. Importantly, though, they’re starting to curl back up.

This combination of weekly and daily RRG tails supports these sectors maintaining their top-five status despite some short-term weakness.

Utilities

It’s interesting to see Utilities, arguably the most defensive sector, take the top spot against a backdrop of strong overall markets. The price chart shows ongoing struggles with overhead resistance, but relative strength continues to rise, cementing Utilities as the current sector leader.

Communication Services

This sector made an impressive leap from 5th to 2nd place. Price action shows a strong rally, now holding well above the former support-turned-resistance level just below 95. Relative strength remains within its rising channel and, while the RRG lines are pushing through the weakening quadrant, there’s still room for a potential curl back up.

Consumer Staples

Staples remains range-bound between roughly 77.5 and 82.5. This sideways movement is reflected in both relative strength and RRG lines. The RS ratio is at its highest level in over two years — we’d have to go back to May/June 2020 to see similar strength for this sector.

Financials

The Financials sector is holding up well, though it’s approaching the former rising support line that could now act as resistance. Relative strength remains upward within its trend channel, keeping the RRG lines stable. The RS ratio remains near 103, positioning Financials on the right side of the RRG.

Real Estate

Real Estate saw a slight drop last week, stalling its recent rally. This impacts relative strength, with the raw RS line moving sideways and momentum rolling over. The RS ratio line’s rise is slowing as a result.

Portfolio Performance

Our model portfolio composition remains unchanged this week. We’re tracking about 3% behind the S&P 500 year-to-date, which is not unusual, looking at the backtest results. And it has not changed since last week. Evaluating this strategy over longer periods is crucial to determining its true potential.

I am planning to write a separate article diving a little deeper into this model and its historical results, showing periods of over- and underperformance and how it has managed to outperform the S&P 500 over extended timeframes.

#StayAlert. –Julius

Amid ever-increasing uncertainties on the global front and similarly rising geopolitical tensions between India and Pakistan, the Indian equity markets demonstrated strong resilience. They consolidated before ending the week on just a modestly negative note. The trading range remained modest; the Nifty oscillated in a 590-point range. While the markets defended their key support levels, the volatility surged. The volatility barometer, the India Vix, spiked 18.49% to 21.63 on a weekly basis.. The headline index finally closed with a net weekly loss of 338.70 points (-1.39%).

A few important things to note from a technical perspective. The 200-DMA is at 24044; the 50-week MA is at 23983. This makes the zone of 23950-24050 a very important support zone for the Nifty. So long as the Index is able to defend this zone, it will continue consolidating in a defined range. Incremental weakness would creep in only if the 23900 level is violated decisively. On the higher side, as evident from the charts, the markets have continued to resist the rising trendline resistance. From now on, the Nift’s behavior vis-à-vis the zone of 23950-24050 would be crucially important to watch; the Index’s ability to defend or not defend this zone will dictate the trend over the coming weeks.

The levels of 24350 and 24600 are expected to act as probable resistance points in the coming week. The supports are at 23900 and 23630.

The weekly RSI is 54.36; it stays neutral and does not diverge against the price. The weekly MACD is bullish and stays above its signal line. A bearish engulfing candle has emerged. Its emergence near a pattern resistance adds credibility to the resistance placed near 24500-24600.

The pattern analysis of both daily and weekly charts shows that the Nifty has traded quite on the expected lines and within the analyzed range. It has continued resisting the rising trendline resistance near 24500-24600; it has so far defended the key that is created between the 200-DMA and the 50-week MA. The markets would weaken only if they violate the crucial 23900 level; so long as this point stays defended, we can expect the markets to consolidate in a defined range.

Based on the overall technical structure, it is likely that the markets will not see any immediate upward trend. While if the markets end up breaching the 23900 level remains to be seen, it is doubtful that they will initiate any sustainable trending upmove and move past the 24500 levels soon. The hedging activity and the cost of hedging have increased; this is evident from Vix, which has significantly risen over the past few days. While the Nifty has defended the key support levels so far, it remains in a technically challenging environment. It is strongly recommended that the market participants adopt a defensive approach by focusing on the low beta stocks and the stocks with improving relative strength. Staying low on leveraged positions, a continued cautious outlook is advised for the coming week.

Sector Analysis for the coming week

In our look at Relative Rotation Graphs®, we compared various sectors against the CNX500 (NIFTY 500 Index), representing over 95% of the free-float market cap of all the listed stocks. 

Relative Rotation Graphs (RRG) show that the Nifty PSE Index has rolled inside the leading quadrant. Infrastructure, Nifty Bank, PSU Bank, FMCG, Consumption, Commodities, and the Financial Services Indices are also inside the leading quadrant. These groups are likely to outperform the broader Nifty 500 Index relatively.

The Nifty Metal Index has rolled inside the weakening quadrant. This may cause the sector to slow down and give up on its relative performance. The Services Sector index also remains in this quadrant.

While the Nifty IT Index continues to languish in the lagging quadrant, the Auto and the Realty Indices are sharply improving their relative momentum against the broader markets while staying inside this quadrant.

The Nifty Midcap 100 index has rolled inside the improving quadrant; may see its relative performance bettering over the coming days. The Media and the Energy Indices are also inside this quadrant, and may continue seeing improvement in their relative performance against the broader markets.

Important Note: RRG charts show the relative strength and momentum of a group of stocks. In the above Chart, they show relative performance against NIFTY500 Index (Broader Markets) and should not be used directly as buy or sell signals.  

Milan Vaishnav, CMT, MSTA

Consulting Technical Analyst

www.EquityResearch.asia | www.ChartWizard.ae

Is a recession coming? In this video, Julius breaks down the latest updates to his powerful Sector Rotation Model, analyzing four key macroeconomic indicators and their impact on sector performance.

This video was originally published on May 9, 2025. Click on the icon above to view on our dedicated page for Julius.

Past videos from Julius can be found here.

#StayAlert, -Julius

Want to know where the stock market is headed next? In this week’s market update, Mary Ellen McGonagle analyzes key resistance levels and reveals what’s fueling the current uptrend. She highlights top bullish setups among U.S. leadership stocks, plus global names showing strength.

This video originally premiered May 9, 2025. You can watch it on our dedicated page for Mary Ellen’s videos.

New videos from Mary Ellen premiere weekly on Fridays. You can view all previously recorded episodes at this link.

If you’re looking for stocks to invest in, be sure to check out the MEM Edge Report! This report gives you detailed information on the top sectors, industries and stocks so you can make informed investment decisions.

Earnings season continues, and this week we’re looking at three companies heading into their reports with different trajectories. One is in a long-term downtrend, one has been a steady riser, and one is somewhere in between. Let’s unpack what’s happening adn what to watch, all with an eye on balancing opportunity and risk, something that matters even more when you’re managing your own nest egg.

Under Armour (UAA): Looking for a Comeback

If you’ve held Under Armour for the long term, you would be better off hiding out literally under armor than trying to make money owning the stock. For traders, though, there may be a near-term opportunity to trade.

The stock’s all-time peak coincided with the peak of the Golden State Warriors and Steph Curry jacking up threes. Every kid in the gym tried to be like Steph, and young basketball players couldn’t get enough of his gear. I know because I coached these kids! Good luck getting them to practice lay-ups… it was just shooting bombs like Curry, but I digress.

Coming to earnings, UAA stock is trading just above all-time lows and is looking for a new catalyst to turn things around (see chart below). Let’s see if Kevin Plank can spark a comeback.

FIGURE 1. DAILY CHART OF UNDER ARMOUR STOCK.Technically, things have been messy over the long-term and intermediate term. But for short-term traders, there may be an opportunity. I’ve added the 20-day simple moving average (SMA) to the chart (green line). Over the past years, when the stock’s price moved above this point, it has led to a near-term rally. Sadly, those rallies have been short-lived. 

Maybe this time it will be different.

The $6.10-$6.20 range is a key level to watch. That’s where the 50-day SMA and the old pocket of longer-term support the stock broke below on April 2 meet. From a risk/reward perspective, use this as the line in the sand to be long or short Under Armour stock.

Any upward momentum that gets price to and above this level could lead to a bigger rally. It’s not a pretty picture, but risk/reward metrics for a short-term trade and potential near-term bottom look possible.

Walmart (WMT): A Bellwether for Tariffs and Spending

Walmart could be one of the most telling stocks when it comes to tariff impacts when they report on Thursday.

Last quarter, the company expressed caution regarding the upcoming fiscal year, cutting their EPS numbers short of analyst expectations. This conservative outlook was attributed to uncertainties surrounding consumer spending and the potential impact of tariffs. Investors will be listening closely to this report for strategies on managing tariff-related challenges, maintaining competitive pricing, and supply chain issues that may make stocking shelves more of a challenge.

Technically, shares gapped lower after the last earnings report and broke a long-term downtrend (see chart below). While price did wash out and successfully test its 200-day SMA, it hasn’t been able to make it all the way back.

FIGURE 2. DAILY CHART OF WALMART, INC. Walmart’s stock price appears to be toppy as it struggles to fill last quarter’s gap. The lack of new highs and a moving average convergence/divergence (MACD) that is extended and turning over lends to a more cautious narrative coming into this week’s numbers.

The trend is not the investor’s friend at the moment. It may be better to wait and see how this result goes and where price settles after the announcement. If you’re hoping the S&P 500 ($SPX) can get back to new highs, WMT needs to lead. Currently, the direction looks lower, but a test and hold of the 50-day SMA at the $91 level may be a better entry point as shares continue to consolidate below all-time highs and wait for more clarity on the tariff front.

Alibaba (BABA): A Wild Card

Alibaba faces a few big challenges as it heads into this week’s earnings. There are a couple of issues at play. 

First is the obvious tariff uncertainty that has clouded this market, although that looks to be heading down a path to certainty. The second is Alibaba’s AI investments. Its latest model, Qwen 2.5, is integrated into Apple’s iPhones sold in China. Seeing a push away from the American product, what impact will this have on BABA’s bottom line?

Let’s dive into the chart below.

FIGURE 3. DAILY CHART OF BABA. Technically, this stock has been all over the map. Trends change on a dime and tend to move quickly. To trade BABA, you should try to wait for bigger moves. This is why I’ve used Fibonacci retracement lines to coincide with larger consolidation areas and moving averages. 

As we head into the week, shares are in a bit of a no man’s land. There is minor support at the $118 area and major support at the 61.8% retracement level that coincides with the 200-day SMA around $102.

To the upside, resistance is up at the $143/$148 52-week high level. Amid trade deal negotiations, it may be better to watch the fundamental story unfold when trying to gauge BABA’s next move. The technicals are at a coin flip and appear to be turning lower. Given solid support levels, that is where it may be safer to add to or enter the stock. 

Final Thoughts

Earnings season isn’t just about catching the next hot stock. It’s about protecting what you’ve built while finding opportunities that fit your comfort with risk.

• Under Armour could offer a short-term trade, but it’s speculative.
• Walmart is a reliable bellwether, but its trend is uncertain.
• Alibaba is full of potential, but comes with added complexity and volatility.

Always remember: there’s no need to chase every opportunity. Go after those that have a higher probability of meeting your investment goals.