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Monday, July 21, 2008

S&P 500 - weekly sector analysis: caution is the word

"Caution is not cowardly. Carelessness is not courage" -- Unknown source

Each week we gather some technical analysis statistics on the overall stock market and in particular the S&P 500. This week's post provides some insight into the sector rotation going on in the S&P 500 and details the performance of the various industry sectors represented in the index.

The following chart is for the week ending July 11, 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.

SP500_stats_07-11-2008
This next chart is for the week ending July 11, 2008. We'll discuss some of the differences below.

SP500_stats_07-18-2008
The most marked change is in the Energy sector. The last few weeks have seen a real change in the trends for most of the stocks in this sector. Looking at the chart above, we see the sector has fallen to the weakest state it has been in in months. Both Aroon and DMI analysis indicate that no stocks in the sector are currently in strong uptrends.

All the excitement has been around the Financial sector lately. Certainly, some of the stocks in the sector have made tremendous gains over the past week; however, it has not been enough to establish solid up-trends in a majority of the stocks in the sector. Still, the momentum seems to be in favor of the Financials at this time and there is a definite improvement that can be seen when comparing the current data to the previous week's.

Health Care is turning in a surprising performance. The sector is in even better shape this week than it was last week despite the rally that saw a move away from defensive sectors.

Consumer Discretionary has also perked up over the last week, in keeping with the move away from defensive sectors. With oil prices falling, confidence in the consumer is returning.

Tech and Industrials get a lot of attention but these sectors seem to be muddling along with faily lackluster performance. Materials aren't doing any better.

Overall, the picture shows that almost all sectors are basically not doing especially well. The previous top sector, Energy, has taken a hard fall. The new heroes, the financials, are moving up but have not yet established durable up-trends. Some say we have put in a bottom. That may be but the current situation shows a market that is very early in establishing any kind of up-trend. Caution is still the word of the day.

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