Last week, we highlighted the deteriorating environment for European Cyclical stocks, in general, and those sectors that belong to the Late Cyclical group, in particular (see here). Indeed, as we review our relative strength point-and-figure charts, more and more companies in the Financial, Industrial, and Information Technology sectors appear rather weak. Industrials, specifically, are showing concerning declines characterized by a combination of the following:
1. continuous, substantial relative underperformance-- by more than 30%, in some cases.
2. little to no warning and in the midst of otherwise positive trend characteristics (breakouts from multi-year bases, strong uptrends that have tested support).
3. there is little support or hope for a quick recovery.
A few examples, keeping in mind that each 'x' or 'o' represents a 2.5% relative outperformance or underperformance, respectively:
The concern here is that other constituents of the group also begin to breakdown and violate important areas of support in a similarly abrupt fashion. Some candidates to watch for?
Testing high performance (dark blue line) support here, with quite a bit of room to fall before reaching the 45-degree bullish support line (lighter blue):
This looked like a breakout, until...:
This multi-year trading range seems more likely to resolve its indecision with a move down (see Alfa Laval, above):
Another failed attempt to sustain an uptrend out of a multi-year base of support?: