Sector Update for November 15th

Last week's sector review observed a key price level around 1064 in the S&P e-mini futures, with some unevenness in the Technical Strength among sectors. We did indeed hold above that level, registering bull highs this past week in the large cap indexes. Interestingly, however, many broader indexes--the Russell 2000, the NYSE Composite, and the NASDAQ Composite--did not make new highs. The number of stocks registering fresh 20-day highs also lagged with respect to the October peak; the advance-decline line specific to NYSE common stocks did not achieve a new high.

Within the large cap universe, however, sectors showed bullish short-term trending, with the notable exception of Financial shares, which continue to significantly underperform. Here is how the Technical Strength numbers look as of Friday's close:

MATERIALS: 320
INDUSTRIAL: 280
CONSUMER DISCRETIONARY: 360
CONSUMER STAPLES: 300
ENERGY: 220
HEALTH CARE: 320
FINANCIAL: -160
TECHNOLOGY: 260

We can see that the economically-sensitive Materials and Industrial shares scored large week-over-week increases, followed by Health Care and Consumer Discretionary stocks. Strength was less notable among Technology stocks; Financial shares are the only group in a downtrend.

During the week, I will be watching the laggard sectors closely; particularly small-cap stocks and financial shares. On the heels of Friday morning's pullback, I saw buying come into those sectors. If that buying can be sustained, we could see a nice move to fresh bull highs in the major indexes. Failure to broaden the rally, however, would fit within a topping scenario and lead me to look for a retracement of much of November's gains.

To keep an eye on day-to-day shifts in momentum and strength, check out the Twitter posts prior to each day's market open (follow here). Those summarize the trend status of my basket of stocks, as well as the Demand/Supply measure of momentum, the number of stocks making new 20-day highs and lows, and the percentage of stocks trading above their 20-day moving averages.
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