Weekend Sector Rotation and Strength Update for October 19

Oct 19, 2013: 12:13 PM CST

Which sectors are on the move at the moment while the indexes break to new all-time highs and which are lagging behind?

Let’s update our Sector Rotation or Sector Strength charts and see for ourselves!

StockCharts Sector Rotation Sector Strength Relative Strength ETFs Amex Sector SPDR

Using StockCharts data, we see the nine major AMEX Sector ETFs displayed in order of the Sector Rotation Model (from top left to bottom right).

From the 10,000 ft view, all sectors look similar in that they’ve all been rising in a steady and powerful (persistent) trend ever since the November 2012 low.

A closer inspection shows that Utilities (XLU) has fared the poorest and is beneath its April 2012 high making it the weakest sector along with Consumer Staples (XLP).

This makes sense because the broader indexes have rallied in a strong bull market, and “Defensive” sectors such as these (often including Health Care – XLP) tend to lag behind during strong bull market phases (and outperform the others during bear market phases).

The strongest sectors at least in terms of breakouts above the prior highs are Energy (XLE) and Technology (XLK).

Surprisingly, Health Care (XLV) also joins the ranks of strong sectors at least relative to the remainder of the pack (XLF Financials, XLY Consumer Discretionary, XLI Industrials, and XLB Materials).

We can see this same picture on a slightly different perspective using TradeStation chart-grid data:

TradeStation Sector Strength Weakness Relative Strength Sector SPDR ETFs

While the StockCharts data above compared recent highs across all ETFs, the TradeStation grid chart above fixes the start-point at the respective May 2013 high and calculates the percentage change from this fixed reference point.

Under that perspective, we still see Utilities as the ‘biggest loser’ along with Consumer Staples, but two additional ETFs are highlighted that may have been missed previously:  Strength in Consumer Discretionary/Retail (XLY) and Industrials (XLI).

Nevertheless, Sector Rotation allows us to get a broader sense of the “Risk-On/Risk-Off” situation while also providing a focus for finding the strongest stocks in the strongest sectors for swing trading candidates (and avoiding buying the weakest stocks in the weakest sectors).

It’s always helpful to dig beneath the surface to find what sectors are leading the pack and which are lagging.

I’ll be discussing breakout, retracement, and reversal trading tactics live at the Las Vegas Traders Expo on November 22 – join me and your fellow traders at the free expo!

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

Corey’s new book The Complete Trading Course (Wiley Finance) is now available along with the newly released Profiting from the Life Cycle of a Stock Trend presentation (also from Wiley).

1 Comment

One Response to “Weekend Sector Rotation and Strength Update for October 19”

  1. Quick Sector Strength Grid to End October | Afraid to Trade.com Blog Says:

    […] For additional perspective, see my prior update from October 19. […]