My weekly run through the S&P500 components is one of my favorite parts of the work week. I put on some music and go through all 1000+ charts. Remember we use the weekly charts to get structural perspective and then the daily timeframes to define more tactical opportunities: 2 charts for each of the 500 stocks. I then break down the index into 11 Sectors and run my analysis of stocks one sector at a time. This way it helps give me a better feel for that particular area within the entire stock market. To take it one step further, I then break down each of the 11 sector workbooks of charts into sub-sectors. So for example, in the “Energy Sector” there will be 4 sub-sectors: Integrateds, Services, Exploration/Production and Refiners.
The reason I’m really pressing this process lately is because of just how sideways the market has been for U.S. Stock Indexes. In order to get clues as to which way this consolidation will revolve is to look under the hood and see what’s going on. Does the body have some strong organs left to keep it alive, or is this it? You can’t just look at a car or look at a person and be able to properly diagnose the problem, or the good health for that matter. You need to open them up and take a good look. A mechanic is an expert at analyzing the car, the Doctor knows the human body and we as market participants need to understand the insides of the market. [Read more…]