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| StatTrader |
 Posted: Sat Apr 29, 2006 4:14 pm Post subject: Sector breakdown |
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One of my favorite techniques for determining how the various market sectors are doing is to graph the ratio of the sector index to the SP-500 index. I read these graphs as though they were charts of individual companies and ask myself "Would I want to own this company now?" If the answer is no, then you shouldn't be buying companies in that sector.
Remember that these are graphs of ratios; they show the relative strength of the sector compared to the SP-500. The graph can go up if both indicies are falling but the sector isn't falling as quickly and similarly, the graph can go down if both indicies are rising but the SP-500 is rising faster than the sector.
This post contains these graph for various sectors with a bit of commentary.
The index vs SP are shown in alphabetical order.
Banking has not done well these past few years. Last week saw a change. If you look closely at the right side of the chart you will see a BIG spike upwards. That spike breaks the down trend line that connects the peaks starting at 4/20/05 through 2/20/06. Banking has formed a bottom and has broken the down trend, this looks like a good sector going forward.
Boitech, bad place to be. Wait for this strong down trend to finish before jumping in.
Starting with the valley around 6/20/05, I can draw in an up trend line connecting those valleys. The graph has just come down to touch that up trend line. Does it bounce off and move up? I'd give that at least a 65% probability. If it drops below that up trend line though, then steer clear of the Nasdaq.
Consumer cyclicals have been on a tear. Can it continue? Sure, but right now they look a bit over-extended. I'd wait for them to fall back to the 0.63 area before buying in.
Defense looks like a steady performer. Had a bit of a correction at the end of '05 and now looks like it is resuming the trend. Not a bad place to be.
Europe has been strong but this looks like it might be the start of a topping formation. Probably want to see it starts another leg up before jumping in.
Software looks like it can't establish a direction. Probably not worth the effort in here.
Healthcare is one big Ouch! recently. Definitely wait for the current down trend to end before entering this sector. Actually, if you draw in a down trend line by connecting the peaks starting around 4/20/05 through 2/20/06, I'd wait for that down trend line to be broken before jumping back into healthcare.
Insurance started into a big slide last October but has now broken the down trend line created by connecting the peaks starting 10/20/05 through 2/20/06. Looks like insurance will be a strong sector for the next few months at least.
Oil services look hot. Hard to tell when this one will end. Draw in the up trend line by connecting the valleys starting 4/20/05 through 2/20/06. If that up trend gets broken then it is time to exit the oil services sector.
Retail looks even worse than software. Why bother!
Semis look like they're making their comeback. I'll start looking around for some picks in that sector.
I think I'll stay away from the Utilities for now. They seem to have established a pattern here, one I'd rather not emulate in my portfolio.
On a tear, I think I'll wait for a drop back to the 0.104 area before buying in.
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| nelaina |
| Posted: Sat Apr 29, 2006 5:01 pm Post subject: |
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CFO
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| thanks! that is a technique I am very interested in. |
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| Im Not Warren Buffett |
| Posted: Sat Apr 29, 2006 8:11 pm Post subject: |
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CFO
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| As much as I normally say "why bother" with charts, I think that the ones you show here can be a great help to people when it comes to narrowing down which sectors to go looking for stocks in. Definitely a very interesting post... did you make those graphs in Excel? |
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| StatTrader |
| Posted: Sun Apr 30, 2006 4:06 am Post subject: |
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| Yes, once you have the historical data the graphs can be generated fairly quickly in Excel. |
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| bradleyt |
| Posted: Mon May 01, 2006 6:28 am Post subject: |
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just wondering the significance of a "top" was, grim always talks about cramer making new tops in areas, like fiber optics, just wondering what it meant
thanks |
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| Dave Rathbun |
| Posted: Mon May 01, 2006 6:56 am Post subject: |
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CFO
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| bradleyt wrote: | | just wondering the significance of a "top" was, grim always talks about cramer making new tops in areas, like fiber optics, just wondering what it meant |
If you look at this chart, posted in the earlier post:
... then you can get an idea. There's a nice long upward trend, but the chart seem to be having trouble continuing the trend and is starting to move sideways. It's like it's bumping up against a ceiling and can't get through, that's a "top" at least the way I understand it. When a chart has topped, there are three things that can happen, two of them bad. The chart can move sideways, it can go down, or it can break through and establish a new upward trend line. |
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| poornewb |
| Posted: Mon May 01, 2006 7:00 am Post subject: |
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Investing Manager
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| Hey These are some good info, I beleive that charts can be valuable to any and all investors. What a better way to find tops and bottoms in stock prices and sectors. After reading all the info on a stock that I can find I then go over to stoccharts.com and study the cart for it and see if im buying on the up, down or level ground. |
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| jacobnbr1 |
| Posted: Sun May 07, 2006 5:53 pm Post subject: |
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Anything that is at a high that has made a real nice 3 year gain like osx, dfx, and eur. i personally am avoiding.
I might be by myself on this but i think it is too risky to be in those positions.
I would rather be buying a sector that has made a new three year low vs those high flyers.
Some day a sector melt down is gonna happen and all that money is going to get shifted into the lower ones that have been ignored.
Ofcourse when? |
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| Grimreaper |
| Posted: Mon May 08, 2006 2:15 am Post subject: |
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CFO
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| jacobnbr1 wrote: | Anything that is at a high that has made a real nice 3 year gain like osx, dfx, and eur. i personally am avoiding.
I might be by myself on this but i think it is too risky to be in those positions.
I would rather be buying a sector that has made a new three year low vs those high flyers.
Some day a sector melt down is gonna happen and all that money is going to get shifted into the lower ones that have been ignored.
Ofcourse when? |
Hmmm, look at da 3 year chawts huh? Sounds like a good suggestion...I wunder where ya came up witit.  Oh yeah...could ya dust off me shoes while ya be down there on me coattails? |
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| jacobnbr1 |
| Posted: Mon May 08, 2006 4:43 am Post subject: |
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| Grimreaper wrote: | | jacobnbr1 wrote: | Anything that is at a high that has made a real nice 3 year gain like osx, dfx, and eur. i personally am avoiding.
I might be by myself on this but i think it is too risky to be in those positions.
I would rather be buying a sector that has made a new three year low vs those high flyers.
Some day a sector melt down is gonna happen and all that money is going to get shifted into the lower ones that have been ignored.
Ofcourse when? |
Hmmm, look at da 3 year chawts huh? Sounds like a good suggestion...I wunder where ya came up witit. Oh yeah...could ya dust off me shoes while ya be down there on me coattails? |
Thats not dust.. Paint overspray? You didn't like the color of yer smawt-car? |
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| Grimreaper |
| Posted: Mon May 08, 2006 5:59 am Post subject: |
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CFO
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| jacobnbr1 wrote: | | Grimreaper wrote: | | jacobnbr1 wrote: | Anything that is at a high that has made a real nice 3 year gain like osx, dfx, and eur. i personally am avoiding.
I might be by myself on this but i think it is too risky to be in those positions.
I would rather be buying a sector that has made a new three year low vs those high flyers.
Some day a sector melt down is gonna happen and all that money is going to get shifted into the lower ones that have been ignored.
Ofcourse when? |
Hmmm, look at da 3 year chawts huh? Sounds like a good suggestion...I wunder where ya came up witit. Oh yeah...could ya dust off me shoes while ya be down there on me coattails? |
Thats not dust.. Paint overspray? You didn't like the color of yer smawt-car? |
Well that can't be true. If you put anudder layer o'paint on a smawt caw it lowers the top speed from 47 MPH down to 35 MPH. That's barely quick enough to get outta da way of a bicycle! I highly recommend any idiot who paid $28000 fo a smawt caw stick mit de o-rigi-nal color and save da estree cha ching! Yer already gonna lose about fifteen grand cause of yer stoopid purchase in the next 2 years or so.  |
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| Colli |
| Posted: Thu Nov 22, 2007 5:16 am Post subject: |
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| I think the sub-prime meltdown show why you can't depent solely on charts for an indication of what any sector is going to do in the future. There are just too many variables and unknowns. |
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| dmccrackin |
| Posted: Tue Nov 27, 2007 7:19 am Post subject: |
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| If you can manage to read any of Grim's ramblings, you are a more patient man than I. |
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| Colli |
| Posted: Tue Nov 27, 2007 12:34 pm Post subject: |
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| I know what you mean - his messages are more than a bit tough to read. |
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| Apathetik |
| Posted: Thu Jan 03, 2008 9:42 am Post subject: |
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| Colli wrote: | | I think the sub-prime meltdown show why you can't depent solely on charts for an indication of what any sector is going to do in the future. There are just too many variables and unknowns. |
This may be true, but there are variables you can eliminate using charts. And I don't think many people rely solely on charts...unless perhaps if they are daytrading, in which case they usually won't be in a position long enough to get hurt to much by "surprises" |
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