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Sunday, June 1, 2008

S&P 500 - sector analysis shows more room for gains

In the process of scanning all the stocks on the NYSE, the AMEX and the NASDAQ this weekend, we have gathered the results of technical analysis on the stocks that comprise the S&P 500. The data is summarized in the following table.

S&P 500
Industry Sector
Aroon - UP Trend % Aroon UP Trend DMI - UP Trend % DMI - UP Trend 20-day MA above 50-day MA % 20-day MA above 50-day MA Total Stocks in Sector
Consumer Discretionary 29 34% 17 20% 45 52% 86
Consumer Staples 18 45% 12 30% 24 60% 40
Energy 32 89% 18 50% 33 92% 36
Financials 16 18% 11 12% 44 48% 91
Health Care 20 38% 9 17% 25 48% 52
Industrials 28 50% 26 46% 43 77% 56
Information Technology 43 61% 34 48% 60 85% 71
Materials 16 57% 6 21% 21 75% 28
Telecom Services 5 56% 5 56% 8 89% 9
Utilities 13 42% 17 55% 27 87% 31

Consumer Discretionary has been in rally mode since March but the numbers now seem to indicate that the sector is on the wane. Though the moving averages indicate the sector is in decent shape, Aroon and DMI indicate that up-trends are weakening or reversing.

The situation in the Financials is even worse. Again, the moving averages indicate the sector is in decent shape, but Aroon and DMI indicate that sustained up-trends are few and far between.

With oil prices where they are it is no surprise to see the Energy sector hitting on all cylinders. The sense of the sector being over-bought is strong, however, and the DMI number shows a potential weakening in trend.

Consumer Staples are turning in a mediocre performance and Health Care can't seem to get going. The fact that these two sectors, often thought of as refuges in times of declining markets, may be a strong indicator that stocks are not yet in a bear market. The numbers in the table bear this out.

Tech and the NASDAQ have been outperforming recently and we can indeed see trend and moving average numbers that support this.

Interestingly, Telecom Services is second only to the Energy sector in terms of percentage of stocks in an up-trend and with bullish moving averages.

All in all, the sectors in the S&P 500 appear to be in decent shape with the exception of Financials and Consumer Discretionary. With the further exception of the Energy, Telecom and Utilities sectors, there seems to be plenty of room for further gains without hitting levels of being over-bought.

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