Thursday, January 13, 2011

Where's the Money Going? "Sector Relative Strength: Recent Rotation" (XLF; XLE)

From Bespoke Investment Group:
The year is still less than two weeks old, but there are already some trends in sector relative strength that bear watching.  In the charts below, we highlight the relative strength of selected sectors versus the S&P 500 over the last year.  In each chart, a rising line indicates that the sector is outperforming the S&P 500 while a falling line indicates underperformance.

Of the six charts below, the three on the left show sectors that had been leading the market but have seen their relative strength deteriorate over the last several days/weeks.  These include Consumer Discretionary, Consumer Staples, and Telecom Services.  The drop we have seen in the Discretionary sector is especially notable given the fact that the only other period where this sector underperformed by such a large degree was back in the late Spring and early Summer correction.

The charts on the right show sectors that began to reverse higher either late last year or early this year.  While the reversal in Energy began in the Fall, Financials and Industrials have seen a dramatic pickup in their performance relative to the market over the last month.  Is this finally the long awaited rebound for the Financial sector after a year long hiatus?  Wall Street certainly hopes so.
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