Sunday, May 03, 2009

Sector Update for May 3rd

Last week's review of Technical Strength (trending behavior) among the eight S&P 500 sectors that I track weekly found that many of the sectors remained in a bullish trending mode, but that the rally's base had narrowed. As stocks made new bull swing highs this past week, we can see that sector strength remained bullish, with Materials and Technology shares benefiting from the promise of economic turnaround, while the more defensive Consumer Staples stocks continued to lag.

Here is how Technical Strength for the sectors shaped up for the past week. Recall that the sectors vary between +500 (very strong uptrend) and -500 (very strong downtrend), with scores between -100 and +100 suggesting no significant trend:

ENERGY: +280

We see a bit of sector rotation in the chart above, with Financial stocks continuing to lose bullish interest, while Energy and Health Care shares picked up buyers. That narrowing base of support for the bull market referenced last week broadened out a bit when all is said and done. That is consistent with the fact that we registered a fresh high in the number of NYSE, ASE, and NASDAQ stocks making 65-day highs last week, as well as a fresh high in the Advance-Decline line specific to NYSE common stocks.

As long as markets are rewarding growth themes and sectors, corrections are apt to be relatively shallow, featuring sector rotation rather than broad-based sector decline. I will be tracking the trending behavior of the basket of stocks representing the eight sectors via Twitter prior to the market open each day as a way of gauging whether those growth themes are continuing or reversing (subscribe here).