What are the sectors telling us?

This has been an amazing two years, and what is hot today, gets cold tomorrow, and vice versa.  Most of the trends in relative strength last for a few years, and you see a lot of volatility during each trend's life span.  Below, you can see a chart of the percentage of S&P 500 stocks currently trading above their 50 and 200-day moving averages.


This shows you that in last two years, at the least, it paid to buy low and sell high.  As we've shown in the past, it is a pretty good indicator that when the number of stocks trading above their moving averages gets to 90%, the market has used up a lot of energy and needs to rest.

Each week, we get a recommended sector weighting from our sector studies.  But with the philosophy of buying low and selling high, it is very important to put our recommendation into context, especially the historical context.  This week, we've seen some interesting improvements and developments across a few sectors.

Don Hays & Nicholas Warf

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