The Best Sector Predictors in a Flat Market

I took a look at the best sector predictors of two-day S&P outcome after a flat day in the S&P. Since March, 2003 (N = 781), when SPY is neither up nor down on the day more than .20% (N = 192), two days later the average price change in SPY has been .22% (118 up, 74 down).

The sector predictors I looked at included the Dow Jones Industrial Average, the Dow Transports, the Dow Utilities, the NASDAQ 100 Index, the Semiconductor Index (SMH), the Banking Index (BKX), and the Russell 2000 Index (IWM).

The two best predictors were the NASDAQ 100 Index (QQQQ) and the Dow Utilities.

I split the sample of flat SPY days in half and looked at when the QQQQ was strong vs. weak. Two days after a strong QQQQ/flat SPY day, SPY was up by an average .33% (61 up, 35 down). After a weak QQQQ/flat SPY day, SPY was up by an average .12% (57 up, 39 down). Strength in QQQQ thus appears to lead strength in SPY.

The best predictor, however, were the Dow Utilities. Two days after a strong Utilities/flat SPY day, SPY was up on average .09% (54 up, 42 down). Two days after a weak Utilities/flat SPY day, SPY was up on average .36% (64 up, 32 down). Weakness in Utilities thus appears to lead strength in SPY.

I will have more on the Utilities later today and on my personal site.