Sunday, September 14, 2008

Sector Update for September 14th

Last week's sector update found that the majority of S&P sectors had flipped from modest upward trending to modest downward trending, as stocks began a move toward their July lows. We saw an expansion of stocks making fresh 20-day lows this past week, an indicator I update before each trading day via Twitter, with particularly volatile price action in the financial stocks. Here's how we're shaking out in terms of Technical Strength (short-term trending) and the percentage of stocks trading above their 50-day moving averages (in parentheses) as of Friday's close:

MATERIALS: +320 (47%)
INDUSTRIAL: -60 (45%)
ENERGY: -200 (10%)
HEALTH CARE: -20 (60%)
FINANCIAL: +120 (62%)
TECHNOLOGY: -60 (19%)

What stands out is the strength in the consumer sectors--not something you'd expect if the market were telling us the economy is going into deeper recession. We continue to see mixed performance among the sectors--more evidence of that sector rotation--with notably stronger performance among materials shares. Financial stocks are surprisingly strong as a sector, given the woes of LEH, AIG, and some regional banks. A look at the components of the sector finds that some stocks (such as WFC) are quite strong; others (AIG) are quite weak. It appears that this market is sorting out the winners and the losers in the financial arena, creating considerable uncertainty in the broad market. The significant strength in the consumer shares has me interested, and I will be tracking that closely this week.