Friday, February 8, 2013

US Sector Trends: Very Strong But Some Cyclical Weakness

Every week in the Weekly Market Summary, we comment on the trend of US indices and 9 $SPX sectors. Our benchmark is maintaining above a rising 13-ema. Below that raises a flag. Turning the slope negative or losing the 50-dma raises an alarm if it is widespread among sectors.

In the past two weeks we've seen some cyclicals not make new highs with the indices and also relative outperformance by defensives. These are worth watching closely.

Two charts. The first one looks at all 9 sectors (all begin with an 'X') as well as IWM, IYT and IYR. All are in nice uptrends (blue line is 20-dma and red is 50-dma). One watch out for this coming week is XLB, IYR and XLY (all cyclicals) have not made a new high in February.

The second chart looks at relative performance the past two weeks. $SPX has move higher by 1.6%, but the leaders recently are defensive sectors (green box: XLU, XLV, XLP) and energy. In a strong uptrend, we obviously want to see everything beside the defensives outperforming. Watch this week.