Saturday, December 13, 2008

Sector Update for December 13th

Last week's sector update found most of the eight S&P 500 sectors that I track for Technical Strength in relatively neutral modes. A number of readers have expressed interest in the Technical Strength measure as a way of tracking the trending behavior of stocks from day to day. Accordingly, I'm now updating the readings for the 40 stocks in my basket (five each from the eight sectors) before each day's trade via Twitter (subscription is free).

Here's how we look as of Friday's close:

MATERIALS: +100 (50%)
INDUSTRIAL: -200 (49%)
ENERGY: +120 (58%)
HEALTH CARE: +20 (55%)
FINANCIAL: -200 (37%)
TECHNOLOGY: +40 (75%)

Recall that these Technical Strength readings vary between +500 (strong uptrend) and -500 (strong downtrend), with zero as a perfect neutral (non-trending) level. Once again, we see that the S&P sectors are largely in a non-trending mode. Materials and energy shares have gained strength on the back of the commodities rally; financial shares have weakened.

Technical Strength is designed as a short-term trend measure; a somewhat longer-term perspective can be gained by assessing the percentage of stocks within each sector that are trading above moving averages of varying duration. This is tracked very helpfully by the Decision Point service. The percentages in parentheses above reflect the proportion of shares in each sector that are above their 20-day moving averages. Overall, the average is very close to the 50% mark, once again showing no solid longer-term trend. Financial shares are weakest over this time frame; technology stocks strongest.

Overall, we are trading in a consolidation mode, with shares ranging from last week's lows to the 900 resistance level in the S&P futures index. I am tracking shifts among the sectors closely, both to identify possible breakouts from this range and to gather of sense of leading and lagging stocks on such a move. Both Technical Strength and the percentage of stocks trading above their 20-day moving averages will be posted each morning prior to the open of markets via the Twitter app.