The S&P 500 is currently battling it out with the most immediate support ($1275 – 1300) and resistance ($1345) levels on the daily charts. While investor sentiment is skewed to the bull-side, among the more active types (hedgies and such) the view seems to be more two-sided.
As such I thought it would be worthwhile to see how various sectors and industries look technically as compared to the S&P 500 itself.
To keep things consistent for this analysis I used SPDR sector ETFs to represent the S&P 500 sectors.
|
Sector |
36 Months |
12 Months |
6 Months |
|
Industrials (XLI) |
.99 |
1 |
.99 |
|
Materials (XLB) |
.98 |
.98 |
.96 |
|
Technology (XLK) |
.94 |
.98 |
.94 |
|
Consumer Staples (XLP) |
.94 |
.96 |
.83 |
|
Energy (XLE) |
.92 |
.98 |
.95 |
|
Health Care (XLV) |
.92 |
.97 |
.90 |
|
Consumer Discr. (XLY) |
.88 |
.99 |
.96 |
|
Financials (XLF) |
.87 |
.91 |
.97 |
|
Utilities (XLU) |
.81 |
.72 |
.49 |
Noteworthy are the decreasing correlations over the past three years of the utilities (XLU) and consumer stables (XLP) vs the S&P 500 (SPY), and the increasing correlation of the financials (XLF) vs. the SPY. Utilities and consumer staples of course are defensive sectors.
The consumer staples have decoupled from the SPY as of late and are pushing aggressively higher. (See Chart)
The utilities seem to have had a mind of their own lately with correlation breaking down from 12 month correlation @ 0.72 to 6 month correlation @ 0 .49. Technically speaking XLU looks to have room to break higher and above $32.25 to at least the early March highs at $32.90.
The XLF meanwhile with the increasing correlation to the SPY over the past 36 months has so far seemingly made a lower high near $16.80, which also coincided with the 50 day moving average (yellow line) and a 61.8% Fibonacci retracement/resistance area.
Could it be that the bid under defensive sectors (utilities and consumer staples) and better offers in financials (XLF) are telling us a cyclical top is nearing?
Just for fun, how about another group of stocks with a non-cyclical tint to them? The pharmaceuticals (as looked at via the DRG index) seem like they could be breaking higher out of multi-year resistance at the $320 level.
Wanna see a chart that in 2011 thus far looks very similar to the financials? Look no further than the semiconductors (SMH). Note the recent failure at the 50 day moving average (yellow line), which just like in the financials coincided with a key Fibonacci resistance level…all of which could mean lower prices going forward.
One more chart on the semiconductors. Note the broken upward trend in the SOX:
Semiconductors are early cyclical and have a history of showing divergence vs. the S&P 500 near market tops. So far it looks like the semiconductors could be signaling some sort of market top happening in the next couple of months as the SMH has been underperforming the SPY for a few weeks now.
In conclusion, while this may be early I do see non-cyclical stocks starting to setup for higher prices while select cyclicals such as the financials and certain technology industries confirming lower price levels. Whether this means a cyclical top in equities is near I’m not smart enough to know but I feel this is at least something to keep an eye on.
Happy Trading
Serge Berger
WWW.THESTEADYTRADER.COM
