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Sunday, June 8, 2008

S&P 500 - defensive sectors and energy lead

This post is intended to provide some insight into the deterioration of the S&P 500 and the performance of the various industry sectors represented in the index.

The following chart is for the week ending May 30, 2008. It gives a breakdown of the industry sectors and the results of running a number of technical indicators on the stocks in each sector.

S&P 500, market statistics for week ending 5-30-2008As can be seen, Energy, Telecom, Information Technology and Utilities are the leading sectors with Health Care and Financials bringing up the rear.

This next chart is for the week ending June 6, 2008.

S&P 500, market statistics for week ending 6-6-2008After the past week, Financials take the honors as the absolutely worst performing sector. Consumer Discretionary has also weakened significantly.

It is interesting to note that the Consumer Staples sector actually improved last week. And Utilities and Health Care held their own. These classic defensive sectors showing strength indicate how worried investors were last week.

Energy continues to be the leading sector and why not, with the price of oil setting new records every other day. Other leading sectors, however, have begun to get shaky. Information Technology, though still strong, is showing the first signs of weakness, especially when looking at the Aroon analysis. Telecom has weakness in Aroon but manages to maintain its strength in the other indicators.

Industrials continue their slow descent. Materials took a big hit this week as investors probably see the slowing of the manufacturing economy reducing the demand for materials.

All in all, it is clear that not all sectors are moving in lock step though most stocks did decline somewhat during the last week. What is alarming is to see the defensive sectors begin to take the lead as Energy hits new highs. This implies risk aversion and a further bet on rising oil prices. This is not a positive development for the markets

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