Sunday, June 29, 2008

Technical Strength of a Weak Market

My measure of technical strength quantifies the trending behavior of five highly weighted stocks for each of eight S&P 500 Index ($SPX) sectors. The technical strength measure varies from +500 (very strong uptrend) to -500 (very strong downtrend), with readings near zero indicating a lack of trend.

Here are how the sector readings are looking for the eight sectors:

MATERIALS: -460
INDUSTRIALS: -500
CONSUMER DISCRETIONARY: -440
CONSUMER STAPLES: -420
ENERGY: -80
HEALTH CARE: -160
FINANCIAL: -460
TECHNOLOGY: -400

This is one of the weakest set of technical strength readings I've encountered; it's typical of markets in which all stocks and sectors--the good with the bad--are being punished. I will be publishing a review of market indicators here on the blog tomorrow; I'm also starting to keep track of stocks and themes *not* making new lows here with the broad market.
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5 comments:

Paolo Pezzutti said...

During a generalized decline like this I would normally be inclined to observe the most resistant sector. It will be probably the one that will outperform the market when the sutuation improves. And that would be again energy. But in this case, the main cause for the market to be so bad is energy. Which is coming from a long trend up. That is why, unless the world is moving toward a dramatic situation of energy shortage that would very negatively impact on our lifestyle, I would not look at energy as the candidate preferred sector.

Mark Wolfinger said...

How good are these number in predicting future direction? How does this compare with October 1987?

Brett Steenbarger, Ph.D. said...

Hi Paolo,

I agree, esp. re: the oil majors.

Brett

Brett Steenbarger, Ph.D. said...

Hi Mark,

I find the numbers quite helpful, but calculate them myself and don't have the data back to 1987.

Brett

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