Sunday, June 28, 2009

Weekend Update: Sector Performance

Here is a sector performance bar chart I like to take a look at from time to time. What you see here (Bottom chart - sorry having some problems with this uploading stuff) is the 9 different sectors in the S + P 500 and the actual performance on the SPX index itself. As you can see the best performing sector for the month is the Tech sector, the Nasdaq and the tech stocks like Google, Bidu, Rimm and Apple have been the leading factors in this rally off the March lows. You also see Health Care and Utilities leading as well. These sectors are defensive sectors, where as the financials, energy, and such are more aggresive offensive plays. The reason I say this is now look at the very same chart setup (top chart) but the date ranges are different. I will use the sector performance chart for the last 10 days....

Here we see clearly that the Health care, Utilities and Consumer Staples sectors have outpreformed the market. And the financials, technolgy and definitly energy sectors have underpreformed.

Why is this important? Well when you start to see the money flowing into these defensive sectors and out of the offensive sectors you can clearly tell that a pullback is underway or in the works. And vice versa when you start to see the sector rotation favor the offensive sectors it would be wise to trade for the upside potential. Sounds easy but it is still very important to recognize these patterns so we can stay on the right side. Because the bottom line is out of 100% of the money flowing into the market it is only probably 25% of the "big boys" money that actually move the market. Follow where the big money is going, be smart and do your homework, probably the best advice I can give especially for a new trader.