Sam Stovall popularized sector investment and analysis in the mid-1990s. While investors can apply various fundamental and technical research techniques, the most objective way to evaluate performance of individual sectors is to compare them relative to each other.
Tracking the performance of all nine Select Sector SPDRs against the benchmark S&P 500 Index provides us with information that can be used to anticipate future rotation of these sectors within the S&P 500 Index.
From February 2011 high, the sectors, from strongest to weakest, are as follows:
- ORANGE Utilities Select Sector SPDR ETF (XLU)
- BLUE Consumer Staples Select Sector SPDR ETF (XLP)
- GREY Health Care Select Sector SPDR ETF (XLV)
- YELLOW Energy Select Sector SPDR ETF (XLE)
- WHITE Consumer Discretionary Select Sector SPDR Fund (XLY)
- GREEN Industrial Select Sector SPDR ETF (XLI)
- RED Financial Select Sector SPDR ETF (XLF)
- MAGENTA Technology Select Sector SPDR ETF (XLK)
- CYAN Materials Select Sector SPDR ETF (XLB)
Observations and Analysis
Since the last review on March 1, the S&P 500 Index has experienced a price decline below the 50-day moving average. In light of this development, we examine the sector rotation since the February 18 high and, as expected, see that during this correction, investors have been rotating out of the sectors formerly at the top into the ones formerly at the bottom.
The S&P 500 Index fell 3.05% between February 18 to March 11, 2011. The worst performing sectors during the uptrend — utilities, consumer staples and heath care — have rotated to the best performing sectors.
Rebased Charts
Our rebased charts display the percent change in price of a number of ticker symbols from a date in the past less the percent in change of a benchmark ticker symbol. This technique allows us to compare the net performance of these ticker symbols of different price levels against a benchmark.
Considering the seemingly consolidation bounce in today’s market, what is your outlook going forward for the SPX/ES? I know you aren’t a fortune teller but I figured you could explain where we are in the sentiment cycle because i find it difficult to decipher were exactly we are in the process. Thanks in advance.
You’ve got your Fed Gov shut-down, nuke reactor melt-downs, and the No Fly Zone break-down.
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So maybe the ban on plastic, disposable shopping bags will shift to the back burner.
We lost your comments made after last Friday night’s backup. Sorry!