Monday, April 05, 2010

Stock Sector Performance and the Sentiment of Money Managers

In my previous post, I showed how the day's theme manifested itself through the relative performance of various asset classes that trade on futures exchanges. Often, we can also detect those themes via the relative performance of sectors within the stock market.

As the above graphic from FinViz indicates, we've seen strength among natural resource-related stocks (Basic Materials) today, with the growth-sensitive industrial and tech stocks also performing well. The more defensive consumer goods, utilities, and health care issues have been relative performance laggards.

In a strong market, we should see growth-oriented and natural resource-related sectors outperforming more defensive sectors; a weak market will feature the reverse. By tracking relative performance over time, we can detect sector allocations and reallocations and read the short-term sentiment of money managers.