Sector Relative Strength (5/6/08)

Below we have updated our charts of sector relative strength. In each chart, rising lines indicate periods where the sector is outperforming the S&P 500. Charts with red shading indicate that the sector has underperformed over the last year. Additionally, in each chart we have also included red dots that highlight each of the Fed rate cuts since August.

Over the last year, four sectors have underperformed the S&P 500 (Consumer Discretionary, Financials, Health Care, Telecom Services), while six have outperformed. Consumer Discretionary stocks are consolidating after strongly outperforming in late January through early February. Consumer Staples, on the other hand, are forming a new downtrend as investors rotate out of defensive sectors.

With oil trading over $120, the Energy sector is starting to rebound after pulling back from the top end of its range. While Energy stocks are outperforming, Financials remain in a downtrend. However, they are currently testing the upper boundary of that range, so how the sector performs in the coming days will give a good signal as to where these stocks are headed.

The Technology sector steadily underperformed the S&P 500 in late 2007 and January and February of this year. Since then, the sector has made a new uptrend in relative performance, as earnings in the sector have generally exceeded investor expectations.

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Comments

[Art L.]

Super guidelines for simple folk like me. Thank you!