Sunday, August 24, 2008

Sector Update: A Look Across Two Timeframes

The week ended with a bounce in stocks and a drop in crude oil prices. Here's how the eight S&P 500 sectors that I follow are faring in Technical Strength (trending; a positive figure denotes uptrend and a negative figure downtrend) and in the percentage of component stocks trading above their 50-day moving averages (in parentheses).

MATERIALS: +100 (52%)
INDUSTRIAL: +160 (56%)
ENERGY: +220 (10%)
HEALTH CARE: +200 (88%)
FINANCIAL: -80 (45%)
TECHNOLOGY: +160 (64%)

Note that, for the Technical Strength ratings, I track five highly weighted stocks per sector. The Technical Strength rating for each stock varies from a maximum of +100 (perfect uptrending) to -100 (perfect downtrending), with scores around zero suggesting a non-trending environment. We can see that financial issues are bringing up the rear, while energy shares have gained some traction since last week's summary. Overall, on the short time frame, we're seeing strength among the sectors, but relatively few vigorous uptrends.

On the longer time frame, as reflected in the percentage of stocks trading above their 50-day moving averages, we can see that energy shares remain weak, with the defensive health care and consumer staples issues displaying relative strength. This is the recessionary theme that, so far, seems to be dominating the inflation theme.