Where do the Sectors Stand on the Bull Market's 3rd Birthday?

The bottom of the market was on March 9th, 2009 - yes, exactly three years ago, and the headlines are now telling us how excited we should be with the 3rd anniversary of this bull market.  But here it comes again...the word is, when bull markets have their 3rd birthday, investors have to get nervous again.

So...let me ask you, when have those headlines - in the entire 3 years - ever told us that we could relax and enjoy bullish conditions?  The answer, of course, is NEVER!  So now they tell us to be nervous.  Mr. Market has the public EXACTLY where it wants them - exactly where they are at virtually every juncture in the market - in the wrong mentality at the wrong time. 

So today, in 2012, we've had a period of the last 3 years, actually the last 12 years, where Mr. Market has convinced the public to love bonds and hate stocks.  We believe Mr. Market is ready to pull their rip cord, and chunk them out the trap door - but in most cases, with no parachute.

So where do our sector studies fit in?  Just take a look at the table below of the stocks in each sector (and index) trading above their 50- and 200-day moving averages.

Click on the image above to view larger tables.

You can see in the tables above how the stocks in certain sectors are performing differently between the S&P 400 and the S&P 500.  For instance, large-cap (S&P 500) Financials have more stocks trading above their 50DMA than their mid-cap counterparts.  Also, while Industrials and Healthcare stocks in the S&P 500 are near the bottom of the list of sectors trading above their 50DMA, their counterparts in the S&P 400 are at the top of the list.

Also, the percent of stocks in the S&P 500 and S&P 400 trading above their 50-day moving average has fallen to around 65% this week from the recent high around 85% (close to that important historical 90% level), which you can see in the chart below.

Click on the image above to view a larger chart.

As you know, January 2012 was a pure and strong growth stock month, and since February, up until a few days ago, has been a retrenchment.  Thus, we believe that's its very important to continue to watch this development in the sectors as we move forward.

Don Hays

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