Monday, May 25, 2009

Sector Update for May 25th


Last week's sector review found that the majority of S&P 500 sectors that I track for Technical Strength (a quantitative measure of short-term trending) were in a neutral mode, with a wide multi-week trading range. After early strength in the week, we fell back into that range, closing the week near the range lows.

As we can see above, five of the eight sectors are firmly lodged in neutral trending mode, with relative strength among the defensive health care stocks and weakness among the more growth-oriented technology issues. Here is how it broke down as of Friday's close:

MATERIALS: +180
INDUSTRIAL: -40
CONSUMER DISCRETIONARY: -20
CONSUMER STAPLES: +40
ENERGY: +60
HEALTH CARE: +260
FINANCIAL: +80
TECHNOLOGY: -260

Recall that Technical Strength varies from +500 (strong uptrend) to -500 (strong downtrend), with scores between -100 and +100 suggesting no significant directional tendency. The recent consolidation range has extended for most of this month and should eventually lead to a significant breakout move. Tracking the themes that are dominating the current market as well as the basket of stocks drawn evenly from the sectors will help us catch that move when it occurs. Meanwhile, fading the range extremes if we do not get an expansion of new 20-day highs/lows and Demand/Supply readings is the operative strategy.

Traders interested in tracking the 20-day highs/lows, trend behavior of the basket of stocks, and Demand/Supply readings will find these posted before the market open each day via Twitter (follow the stream of tweets here).
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