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The major indices closed with nice gains on Wednesday, but well off the highs achieved earlier in the session. The S&P 500 Index (SPX) gained 1.4%, while the Invesco QQQ Trust (QQQ) added 2.1%. So, it shouldn't be hard to tell what sector led – technology. But the bigger technical picture remains troubling, observes John Eade, president of Argus Research.

The Technology Select Sector SPDR Fund (XLK) jumped 3% on Wednesday, and the rally had broad industry participation. Consumer Discretionary was second, rising 2.4% due to a 5.5% gain in Tesla Inc. (TSLA), while Communication Services added 1.7% on gains in Alphabet Inc. (GOOGL) and Meta Platforms Inc. (META).

Still, chart provider StockCharts has a proprietary system known as SCTR, or the StockCharts Technical Rank. It is a relative strength metric that rates a stock's technical strength against its peers. Stocks are assigned a score based on six key indicators covering different timeframes.

Within the S&P 500, the strongest 10% are ranked from 90 to 99.99, while the weakest 10% are scored from 0 to 9.99. These rankings tell a story that should be obvious to anyone that follows the market closely.

The three highest-ranked sectors are Consumer Staples (88), Utilities (79), and Financials (72). That's certainly not the type of leadership one would prefer, and it is reminiscent of defensive posturing during an ongoing correction/bear market.

The weakest are Technology (7), Materials (12), and Energy (13). Drilling down, the weakest IT industries are renewable energy (6) and semis (12). While not impossible, it will be tough for strong returns from the majors unless Technology gets off the mat.

About the Author

John Eade is CEO and President of Argus Research Corporation. He has been with Argus since 1989 and has worked as an analyst, director of research, market strategist, and director of portfolio strategies at the firm.

Mr. Eade has an MBA in finance from New York University's Stern School of Business and a Bachelor's degree in journalism from Northwestern University's Medill School of Journalism. He has been involved with Argus's new product development team, which has kept the company at the forefront of the independent research industry.

Mr. Eade is a founder and board member of the Investorside Research Association, an industry trade organization. He is also a member of the New York Society of Security Analysts and the CFA Institute. Mr. Eade has been interviewed and quoted extensively in The New York Times, The Wall Street Journal, Forbes, Time, Fortune and Money magazines, and has been a frequent guest on Fox Business News, CNBC, CNN, CBS News, ABC News and the Bloomberg Radio and Television networks.

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