The recent Fitch downgrade of U.S. debt may have surprised some people. For those following S&P 500 – stock sectors, it probably came as confirmation that the U.S economy could be weakening.
The weekly S&P 500 (SPX) chart courtesy of Trading View compares it to three stock sectors.
The 07/16/23 blog “S&P 500 – Sector Analysis” compared the SPX with two sectors and one sub sector. The blog conclude with the following.
“This continuing divergence with one of the main U.S. stock indices is an additional clue there could be serious problems developing in the U.S. economy.
If there are problems with the U.S. economy, it’s possible the three charts illustrated in this blog have given you more of a warning than most Fundamental analysts you could see on CNBC.
To quote Robert Prechter “The market is the news”. “
The current chart compares the SPX with the Technology, Consumer Discretionary, and Financial Sectors.
Note that during the March 2020 to January 2022 bull market all three sectors moved up with the SPX. Things are different in 2023.
The bulk of the SPX strength in the recent rally has come from the Technology sector which has moved above its January 2022 peak.
The Consumer Discretionary and Financial sectors have underperformed the SPX since March 2023. The Financial sector is especially weak – failing to exceed its February 2023 top.
An underperforming Financial sector is usually a clue of developing economic weakness.
The daily SPX chart shows an interesting time cycle.
The October 2022 to July 2023 rally exactly matched the January 2022 to October 2022 decline.
Since 1998 there have been five – SPX significant July tops. Three of the post July declines lasted three – months, terminating in October. Perhaps an SPX decline after 07/27/23 could end in October 2023?
Four Dimension Trading 