Market Summary

The chart below is a 6 month daily chart of the S&P 500 showing an approximate 13% rise from low to high while it is up approximately 6% for the Year-to-Date period. What is noticeable about the chart is what is known as an inverted Head-and-Shoulders formation from about the middle of February up to the present. A Head-and-Shoulders formation is a chart pattern with three peaks, the middle peak being the highest, and the other two peaks forming the right and left shoulders. It is a topping pattern. However, an inverted Head-and-Shoulders formation is the opposite as it is an upside down Head-and-Shoulders formation and is a potential predictor of a move to the upside. In this case it predicts an upside move of approximately 100 points or to 1440. Will that happen? We will just have to wait and see. Click on chart to enlarge.

As a follow up to my previous post on the performance of the nine S&P 500 sectors the table below shows the sectors sorted by Volume % Change and what is of note is that the Technology sector shows an increase in volume while the other sectors and particularly energy show a marked decrease in volume. Energy has had a great run but now appears to be selling off in terms of volume inflows. Libya in particular is responsible for rising oil prices and I would not be surprised if the seeming stand off comes to a close soon with the fall of Gaddafi. That would surely bring the price of crude down. Click on table to enlarge.

A further comparison of Energy and Technology sectors shows that Energy is off of its high and that Technology has outperformed Energy in both the 2 week and 4 week time frames. Money rotates from the different sectors and while Energy is and has been the leading market sector on a shorter time frame it may lag allowing other sectors like Technology a chance to play catch up. Click on table to enlarge.

Market Summary

With the end of the 1st quarter behind us I thought it would be a good idea to look at how the different sectors of the economy are doing. In trading and investing, if you pick the right sector to invest in even if you make a bad individual stock pick chances are you will be a winner and can say along with Charlie Sheen "winning". The old saying "a rising tide lifts all boats" can be applied to sector analysis. The S+P 500 is divided into nine sectors that can be followed with the following ticker symbols: XLB, XLE, XLF, XLI, XLK, XLP, XLU, XLV, and XLY. With this in mind I want to identify and take a look at the strongest and weakest sectors and the winner of the strongest sector award goes to XLE, the energy sector. As can be seen from the chart below it has been rising on a steady uptrend with prices well above their 50 day moving average which has acted as support. Click on chart to enlarge.

The winner of the weakest sector award goes to XLF, the financial sector. As can be seen from its chart below it has had choppy moves going back and forth as it has been rising and is currently right on its 50 day moving average at 16.53. As no continued rally in the economy can take place without support from the financial sector the question arises: Is the XLF the "Canary in the coal mine?" or is it simply lagging the broader economy? This is a difficult question to answer and time will tell so we will just have to wait and see. Click on chart to enlarge.

The table below list the performance of each of the nine sectors sorted by Year-To-Date(YTD). As can be seen at the end of the 1st quarter XLE is up nearly 16% while the XLF is up less than 1%. This is the kind of difference that makes all the difference in your trading and investing. For comparison, the S+P 500 is up 6.45% YTD. I hope this helps. Click on table to enlarge.