Let's Go Sector By Sector And See For Ourselves!

JC Parets
April 27, 2019

A Doctor would never diagnose a patient without first seeing what's going on inside. A mechanic won't be able to tell you what's wrong with your car without lifting the hood. It's no different in the market. How can we possibly judge the S&P500 without opening it up first to see what's happening among its components.

Today we're going to focus on the sectors themselves. We're looking at weekly candlestick charts for all of the 11 major sectors:

  • Technology
  • Real Estate
  • Energy
  • Healthcare
  • Financials
  • Consumer Discretionary
  • Consumer Staples
  • Utilities
  • Industrials
  • Materials
  • Communication Services

How many sectors are making new highs? How many are making new lows? Are more of them starting to trend higher or are more of them starting to trend lower. In which direction are consolidations resolving, higher or lower?

Ladies and gentlemen, this is great data that we then use to identify the direction of the major indexes like the S&P500 and Dow Jones Industrial Average. While I think it's important to analyze the indexes themselves, I find it much more rewarding to break it down to the sector level, and then ultimately to the stocks themselves. It's a market of stocks after all. There are multiple layers to the top/down approach and today we're focused on the sector groups.

I think the common denominator right now is that many of them are, or have been, range bound. Although, the sectors who have resolved their ranges, have done so higher. That's certainly worth noting.

But first let's look at the ones that are clearly in the midst of consolidations. Here are Industrials running into the downtrend line from former highs, where demand has yet to absorb that overhead supply:

We're seeing pretty much the same thing in Materials:

And in Financials as well:

Consumer Staples are in a similar situation but already flirting with breaking out higher from that range:

Some of them are already breaking out. Look at Consumer Discretionary exceeding last year's highs:

Real Estate too:

Utilities have also broken out to new highs:

And of course, Technology is also making new highs. It's what it does:

Communication Services haven't quite broken out above former highs, but certainly appear to be approaching those levels:

Healthcare is right in the middle of its range, despite the recent selling:

And Energy is within a range and no particular trend in place:

I showed you the best and I showed you the worst. How are you feeling?

Was there more good than bad? Are more of them going up vs going down? How many are making new highs vs making new lows?

These are weekly candlestick charts going back 3-4 years. These aren't "long-term charts", but they're not too short-term either. I think they provide us with a certain sweet spot of that intermediate-term time horizon where we're trying to identify trends to make money this month or this quarter. I think these weekly charts helps us approach the market from a much more informed position.

If you're a longer-term investor, this will give you a more tactical look at what is happening in the market. If you're an intermediate-term investor working on your P&L for the year, this is an important timeframe. And if you're a short-term trader, these become your "long-term" charts so more near term trades can fall within the context of longer-term trends and increase the probabilities of success.

So with very few exceptions, I think this group of 11 charts can help a wide range of market participants in a variety of ways.

For me, I see stocks resolving higher. More of them are going up vs down. I see sideways trends and uptrends. So do we want to be buying stocks or selling them?

I want to be looking for stocks to buy.

How do you guys see it?

Let me know!

JC

Now let's do that for the U.S. Indexes

 

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