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Sector Analysis: Weekly SDPR Performance & Dow Transports Seasonality - Week Ending May 19, 2017.

|Includes: Materials Select Sector SPDR ETF (XLB), XLE, XLF, XLI, XLK, XLP, XLU, XLV, XLY

Weekly Sector Recap

It was a defensive-looking finish to a tumultuous week. After Wednesday's selloff it wasn't as ugly as it could have been though. The S&P 500 finished only 0.38% lower. Not bad considering it was down 1.82% for the day on Wednesday's close. Only one economically-sensitive sector, Industrials, finished in the weekly relative-leaders camp. It still had a negative finish for the week though…

The real relative leaders were Consumer Staples, Utilities, and Energy. The first two are from the defensive SPDR group. The Energy SPDR (NYSEARCA:XLE) got a boost this week from light-crude oil. West Texas Intermediate - WTI - was up 5.92% for the week. Overall it was a risk-off weekly finish for the market. Considering we are entering the weaker summer months, caution is advised (June swoon soon?).

Transports Can't Get a Break (Or maybe they will…)

The relative strength of the Dow Transportation Index is still lagging the S&P 500 significantly. Take a look a look at the following chart. The Transports have been in a relative downtrend since early December 2016. The chart also has the absolute performance of the S&P and the Transports broken out in the lower panes. The divergence between the S&P and the Transports took hold in early March…

The Transports lost its Mojo in March and can't get back up. The relative strength line is right at October 2016 support. That is right where it was prior to the November Trump Jump blastoff. It looks like it is make or break time for the Transports this coming week.

So what is breaking down in the Transportation Index? The following chart breaks out its individual sub-groups (year-to-date). The real weakness is coming from Delivery Services and Trucking. Perhaps this is due in part from weakness in the retail sector.

Maybe the trucks pulling up to the Macy or Dillard's delivery docks aren't quite as full as they once were, or maybe they just drive by on their way to an Amazon fulfillment center? I know the Macy's in my local mall is like a ghost town, but the food court is still always packed with people glued to their mobile devices (hmm…).

On the other hand Railroads are doing quite well (up 11.04% year-to-date). Rails are more closely tied to manufacturing which is doing quite well as of late (you need a railcar to move a new car from the factory). And, overall the U.S. economy is doing quite well. With that in mind, it appears there is some type of divergence (paradigm shift?) at play within the Transportation Index (political or economic?).

Transports' Seasonality - What happened?

I have no clue, but March should have been a stellar month for the index. Following is a 20-year seasonality chart for Transports (1997 - 2016). March is seasonally its second best month of the year after October. It historically averages a 3.2% gain (source: StockCharts.com)...

For 2017 the Transportation Index was down 3.2% in March. Something to dig into deeper this coming week…

Thanks for the read…

Previous Instablog's for Reference:

Sector Analysis: Economically-Sensitive Sectors Continue To Lead: Week Ending May 5, 2017.

Sector Analysis: Weekly, Monthly, and YTD SPDR Sector Performance - Week Ending April 28, 2017.

Sector Analysis: Equal-Weighted Sector ETF's Confirm Last Week's Rally - Week Ending April 21 St, 2017.