Sector Performance Should Worry Equity Bulls

With today being the last day of the month you’ll likely see the calls for month-end window dressing and a bunch of other excuses for why the market rises or falls to finish out February. It’s often best to take all of this with a grain of salt. However one thing we can look at as we head into March is the sector performance for the first two months of 2013.

Stockcharts has a great sector tool to look at performance of the 9 S&P sectors on a customizable time frame. So far we have two sectors in the red (tech and materials) with a clear outperformance in energy, healthcare, and staples. While equities have had decent performance so far this year, it appears the advance has come on the back of some of the lower-beta areas of the market.


Where does this put us in the grand scheme of things? It doesn’t look good. As you can see from the cycle chart below, which shows what sectors typically outperform in various stages of the market and economy, energy, staples, and healthcare sit at the crest (top) of the cycle. When we expand our view and look at the sector performance from the Nov ’12 bottom through yesterday, we can see that financials, industrial, and energy are the top performers, with technology being the laggard.

CycleThis isn’t a good sign for equity bulls it’s not necessary the final bullet to stop them in their tracks. I’m still looking to see if we can test the high of 1530, although it appears equities are gasping for air as traders attempt to regain their footing.


Disclaimer: Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this post is meant for educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned in the blog. Please see my Disclosure page for full disclaimer. Connect with Andrew on Google+.

About Andrew Thrasher, CMT

Andrew Thrasher, CMT is a Portfolio Manager for an asset management firm in Central Indiana. He specializes and writes about technical analysis as well as macro economic developments.