Technical Tuesdays: Sector Scan

Breaking the broad market down to its component areas is a useful exercise - one that can provide a predictive insight into the overall trend in place, whether that trend is intact, in transition, or in reversal, and which areas might be more or less attractive than another. The accompanying table (click image to enlarge) provides information regarding the overall US equity market and it current and prospective trend.

As the table shows rather clearly, there are very few signs of trend change, which is to say that the trend in place is intact. If a trend reversal were somewhere close to the horizon, more than a few individual US economic sectors would have begun to show signs of a divergence*. What the table shows is no such divergence exists - not even for the recent weak Utilities sector.

Investment Strategy Implications

Drilling down is one way to gain a deeper reading on the state of the market. Another is to compare and contrast one market to another. This posting illustrates that within the US markets and from a US economic sector perspective**, there is little in the way of a meaningful warning sign that the trend in place (which is bullish) is near a reversal. Sideways for a while? Most likely. Pullback or correction? Yes, that, too. Trend reversal (from bull to bear)? Nope.

Next week's Technical Tuesdays posting will look at how markets measure up one to another.

*See Divergence Principles posting for an introduction.

**Size and style analysis is the other intra market approach. Unfortunately, at this time the value in this area of analysis is limited as synchronicity between and among the groupings provides virtually no useful information. Which is another way of saying size and style sectors match very closely the broad market thereby providing little to no predictive insights.

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Technical Tuesdays is a product of Blue Marble Research Advisory and illustrates selected elements of market intelligence analysis. Market intelligence analysis - along with fundamental and thematic analyses - form the three-legged stool of the analytical approach employed by Blue Marble Research Advisory.

To learn more about Blue Marble Research Advisory services and its integrated approach to investment strategy and decision-making, click here.