Why Sector Cycle Bullseye is Watching the ‘Tale of the Tape’

Most markets are closed over the weekend, so I often use the time to get ahead on analysis. You see, the market is kind of like Mother Nature - it doesn’t wait for you, me, or anyone else, or whatever we have planned in our lives. It’s important to me that you know what’s going on in markets, not just at a surface level, but with respect to its internals as well. After all, this is where the most profitable opportunities germinate.

If you’ve ever watched one of my sessions in the TheoTrade chat, you know that I like to take a top-down approach to markets. So I think it’s a great idea going forward  to review the performance of various sectors in the S&P 500 to share a deeper story… 

Every Sector Behaves Differently

The venerable S&P 500 is divided into 11 sectors and 24 industry groups:

Certain sectors in the market that are considered “risk-on,” in which investors are confident and content to put capital on the line, while others are considered “risk-off,” where investors are a little more leery, a bit more gun-shy. If we consider the performance leaders over the various time intervals in the table above, bulls couldn’t be happier.

Seeing sectors like technology and communications outperform over the past year only vindicates the trend of this market - which is up. I know Nvidia plays a big role in this, but guess what? It’s included in the SPDR Technology  ETF, XLK.

So, until we start seeing some of the defensive sectors like consumer staples, utilities, or even healthcare capturing some of these leadership positions, it’s imperative that we stay with the trend - it remains higher, for now.

“The trend is your friend” is an old Wall Street cliche, but it’s become that for a very good reason. We’d be wise to take heed.  We’ll talk again soon...