What's the Worst Sector This Week?

There is no contest, in my opinion, as to which area is the most important to follow - the "market" or the "market of stocks."  In other words, the very widely documented "market" indices are so often distorted due to a handful of stocks, especially at market turning points, that they lead public opinion totally in the wrong direction.

You can really see that in today's market.  We are not far from the high point of the rally according to the indices, but internally, there has been a correction going on since at least the first of February.  We believe our sector studies illustrate the "internal" nature of the market about as effectively as anything, and from this week's review, here's a few of the highlights:
  • Technology is continuing to show strong moves to the upside.
  • Financials have also shown a nice move to the upside.  It is the strongest performer in our short-term and mid-term readings in the large-cap universe.
  • Energy and Utilities continue to be the worst performing sectors in recent months.
  • Industrials continue to show some weakness.

In the tables below, you can see where both the mid-cap (S&P 400) and large-cap (S&P 500) sectors currently stand as measured by the percentage of stocks above their 50- and 200-day moving averages.

Click on the image above to view larger tables.

Then, in the chart below, you can see the total number of stocks in the combined indices (S&P 400 and S&P 500) that are trading above both their 50- and 200-day moving average.

Click on the image above to view a larger chart.

As you review the middle chart above, you see the very definite peak in the "momentum" of the market at the end of January.  Actually, February 4th seemed to pinpoint the point when the current dysfunction set in.  That was also about the time when the price of oil bottomed out around $96 a barrel and then moved up sharply to $110 a barrel.  But strangely enough, one of the weakest sectors right now is Energy.

Don Hays, Nicholas Warf and Justin Wood

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