Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
Silver Has Already Gone from Weak to Strong Hands - 15th July 19
Top Equity Mutual Funds That Offer Best Returns - 15th July 19
Gold’s Breakout And The US Dollar - 15th July 19
Financial Markets, Iran, U.S. Global Hegemony - 15th July 19
U.S Bond Yields Point to a 40% Rise in SPX - 15th July 19
Corporate Earnings may Surprise the Stock Market – Watch Out! - 15th July 19
Stock Market Interest Rate Cut Prevails - 15th July 19
Dow Stock Market Trend Forecast Current State July 2019 Video - 15th July 19
Why Summer is the Best Time to be in the Entertainment Industry - 15th July 19
Mid-August Is A Critical Turning Point For US Stocks - 14th July 19
Fed’s Recessionary Indicators and Gold - 14th July 19
The Problem with Keynesian Economics - 14th July 19
Stocks Market Investors Worried About the Fed? Don't Be -- Here's Why - 13th July 19
Could Gold Launch Into A Parabolic Upside Rally? - 13th July 19
Stock Market SPX and Dow in BREAKOUT but this is the worrying part - 13th July 19
Key Stage 2 SATS Tests Results Grades and Scores GDS, EXS, WTS Explained - 13th July 19
INTEL Stock Investing in Qubits and AI Neural Network Processors - Video - 12th July 19
Gold Price Selloff Risk High - 12th July 19
State of the US Economy as Laffer Gets Laughable - 12th July 19
Dow Stock Market Trend Forecast Current State - 12th July 19
Stock Market Major Index Top In 3 to 5 Weeks? - 11th July 19
Platinum Price vs Gold Price - 11th July 19
What This Centi-Billionaire Fashion Magnate Can Teach You About Investing - 11th July 19
Stock Market Fundamentals are Weakening: 3000 on SPX Means Nothing - 11th July 19
This Tobacco Stock Is a Big Winner from E-Cigarette Bans - 11th July 19
Investing in Life Extending Pharma Stocks - 11th July 19
How to Pay for It All: An Option the Presidential Candidates Missed - 11th July 19
Mining Stocks Flash Powerful Signal for Gold and Silver Markets - 11th July 19
5 Surefire Ways to Get More Viewers for Your Video Series - 11th July 19
Gold Price Gann Angle Update - 10th July 19
Crude Oil Prices and the 2019 Hurricane Season - 10th July 19
Can Gold Recover from Friday’s Strong Payrolls Hit? - 10th July 19
Netflix’s Worst Nightmare Has Come True - 10th July 19
LIMITLESS - Improving Cognitive Function and Fighting Brain Ageing Right Now! - 10th July 19
US Dollar Strength Will Drive Markets Higher - 10th July 19
Government-Pumped Student Loan Bubble Sets Up Next Financial Crisis - 10th July 19
Stock Market SPX 3000 Dream is Pushed Away: Pullback of 5-10% is Coming - 10th July 19
July 2019 GBPUSD Market Update and Outlook - 10th July 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

Stock Market Sector-By-Sector Analysis

Stock-Markets / Sector Analysis Nov 30, 2009 - 10:12 AM GMT

By: Graham_Summers

Stock-Markets

Diamond Rated - Best Financial Markets Analysis ArticleYesterday, I noted that this market rally since March 2009 has been one of the most beta-heavy rallies in history. This means that picking out individual investments (individual stocks or companies) has contributed FAR less to investment success than the allocation of one’s money into the right “sector” or “asset.” 


Put another way, looking for “winners” has been rendered virtually obsolete. After all, why bother with the due diligence required to perform successful stock picking when the ENTIRE S&P 500 is up 50%+ since the March lows? Just plunk your Dollars into the market index and you’ve got a serious gain.

I also noted in yesterday’s essay that much of this year’s market action has been fueled by the Dollar carry trade. With the Dollar showing more and more signs of a coming rally, I thought it would be worth reviewing the entire market on a sector by sector basis. If the market is indeed topping and preparing for a massive collapse, we should see the former leaders lagging the general index.

Let’s start with the S&P 500. Here we see the market breaking above its 50-day moving average and staying there since March 2009. More recently, since July the rally has been dominated by a new series of higher lows and higher highs.

It is worth noting, however, that we saw a new lower low that broke below the 50day moving average in late October. This indicates the upward momentum may have been broken (combining more advanced technical analysis tools with macro trends, I think this is CERTAIN, but that’s a topic for another essay).

Ok, on to the sectors.

First off, Oil Services (OIH).

Unlike the S&P 500, oil service provider stocks have FAILED to make a new high. In fact, they’ve collapsed to test their 50-day moving average (DMA), bounced, and then broken the 50-DMA. The upward momentum here is decidedly broken and the next move should be a test of the 200-DMA.

So Oil is a lagger.

Ok, now for Pharmaceuticals (PPH):

Wow, not only a new high, but a PARABOLIC one. The Pharmaceutical ETF is EXTREMELY overextended above its 50-DMA. The momentum here is strong, but has gone too far. Id expect a test of the 50-DMA or at least a small correction followed by a period of consolidation.

Pharmaceuticals are leaders.

Internet (HHH):

Very similar chart to the Pharmaceuticals: a new high and extreme overextension above the 50-DMA. Looks like time for a correction or at least a cooling here. But the uptrend remains strong.

Internet is a leader.

Semiconductors (PSI):

Another failed new high followed by a major breaking of support (50- and 200-DMA). This bounce has a “dead cat” look to it given that the semis broke through both moving averages with little difficulty.

Semiconductors are lagging.

Utilities (XLU)

Wow. Possibly one of the weakest sectors in the market: utilities have essentially been trading sideways in an expanding wedge pattern since July. We also see a failure to hit a new high in November after the market plunge in October. Another laggard, and it’s closely related to the economy (as opposed to financials).

Defense (PPA)

The upward momentum here is strong. We saw a brief violation of the 50-DMA but PPA quickly regained its composure and rebounded. We also see a new high in November. The momentum here shouldn’t bee too much of a surprise given the huge government spending going on.

Defense is a leader.

Nanotech (PXN)

Upward momentum broken. Failure to make a new high. And now moving within a tightening trading range between the 50-DMA and 200-DMA. The potential for a violent breakout is high here. Looking at the chart I’d posit it’s going to be down.

PXN is a laggard.

Insurance (PIC)

Another former leader now a laggard: insurance has failed to form a new high in November and looks to be rolling over after a dead-cat bounce. The next line of support is the 200-DMA. Below that and you’re looking at a drop to the July lows.

Insurance is a laggard.

We’re going to stop here for today. Here are the results so far:

The bulls should take note that five of the eight sectors we’ve reviewed have FAILED to hit new highs in November. We’ve got another eight sectors to go tomorrow, but the mere fact we’re seeing so many sectors failing to confirm the general market’s new highs indicates that this latest rally into November is NOT the start of a new bull market (if it were we would be seeing market breadth INCREASE, not decrease).

I believe stocks are set to revisit the March 2009 lows sometime in the next twelve months. To that end, I’m already positioning readers for the coming storm with FREE Special Report detailing THREE investments that are set to explode when the next Crisis hits.

I call it Financial Crisis “Round Two” Survival Kit. Not only can these investments help protect your portfolio from the coming carnage.. they can ALSO show you enormous profits: they returned 12%, 42%, and 153% last time stocks collapsed.

Swing by www.gainspainscapital.com/roundtwo.html to pick up a FREE copy today!

Good Investing!

Graham Summers

http://gainspainscapital.com

Graham Summers: Graham is Senior Market Strategist at OmniSans Research. He is co-editor of Gain, Pains, and Capital, OmniSans Research’s FREE daily e-letter covering the equity, commodity, currency, and real estate markets. 

Graham also writes Private Wealth Advisory, a monthly investment advisory focusing on the most lucrative investment opportunities the financial markets have to offer. Graham understands the big picture from both a macro-economic and capital in/outflow perspective. He translates his understanding into finding trends and undervalued investment opportunities months before the markets catch on: the Private Wealth Advisory portfolio has outperformed the S&P 500 three of the last five years, including a 7% return in 2008 vs. a 37% loss for the S&P 500.

Previously, Graham worked as a Senior Financial Analyst covering global markets for several investment firms in the Mid-Atlantic region. He’s lived and performed research in Europe, Asia, the Middle East, and the United States.

    © 2009 Copyright Graham Summers - All Rights Reserved
    Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

    Graham Summers Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules