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Sector Analysis: October Is More Trick Than Treat, So Far – Week Ending Oct. 21, 2016.

|Includes: XLB, XLE, Financial Select Sector SPDR ETF (XLF), XLI, XLK, XLP, XLU, XLV, XLY

Weekly Sector Recap

Last week was an improvement over the previous week. The previous week saw only two sectors with positive weekly finishes - Utilities and Consumer Staples - both defensive areas. Last week three of four aggressive sectors - Financials, Cyclicals, and Technology - had positive finishes, along with Materials, Energy, Utilities, and Healthcare. Seven of nine sectors with positive weekly finishes, is, well, positive...

(Weekly Sector Performance -

It was encouraging to see Cyclicals (NYSEARCA:XLY) finish in the top three sectors. Q4 is its strongest seasonal period. The sector was boosted by a surge in Netflix (NASDAQ:NFLX) after its earnings announcement on Monday. NFLX was up 25.65% for the week.

On the flip side, Industrials, which is also an aggressive sector, finished last. It was impacted by Union Pacific's (NYSE:UNP) earnings miss Thursday. UNP was down 6.68% on the week and it dragged down the other railroad stocks. It also negatively impacted transports. UNP is a member of the Dow Jones Transportation Index.

Healthcare, which was the biggest laggard the previous week, got a boost from the Healthcare Providers group last week. United Health (NYSE:UNH) was up 8.55% for the week following its upbeat earnings on Wednesday.

Month-to-Date Recap

We are three weeks into October and the only sector positive for the month is Financials. Even with the improved overall sector performance last week, the month-to-date metrics don't look so hot…

(Month-to-Date Sector Performance -

Looking at relative strength, the picture somewhat improves. Financials, Technology, Cyclicals, and Energy are the relative leaders compared to the S&P 500 as the benchmark. These are the areas where you want to be over-weighted.

(Month-to-Date Relative Performance -

For the most part it has been a pretty disappointing month. Rising Treasury yields are boosting the Financials, the only bright spot. A strengthening U.S. Dollar is weighing on the large-cap S&P 500 index…

(Month-to-Date Market Metrics -

As mentioned in the previous week's blog, a rising dollar impacts multinationals, many of which are in the S&P 500. Mid-caps (S&P 400) and small-caps (S&P 600) are under-performing in October as well.

The CRB (Commodity) Index is being positively impacted by Energy and Agriculture. Industrial Metals and Precious Metals are the big laggards for October…

(Month-to-Date Commodity Groups -

The big rally I expected due to the rise in Treasury yields has not materialized. Also disappointing is the no-show of the strength in the consumer-discretionary (Cyclicals) sector.

This market may be booking time ahead of the next FOMC meeting and the Presidential election, both in early November. However, there has been evidence of money coming off the sidelines to "buy on the dip" as seen during the month. Perhaps this portends pent-up demand…post-election?

Thanks for the read…

Previous Instablog's for Reference:

Sector Analysis: Seeking Alpha Using Relative Strength - Week Ending Oct. 14, 2016.

Sector Analysis - Rising Treasury Yields Support An October Rally - Week Ending Oct. 7, 2016.

How To Time The Market: Preview Of Seasonality Trends For Q4-2016.

Disclosure: I am/we are long XLY.