Tuesday, November 20, 2007

A breakdown of the Five Largest S&P Sectors

The five largest industrial areas of the S&P 500 are the financials (19.82%), Information Technology (16.18%), Energy (11.68%), Health Care (11.64%), and Industrials (11.51%). Let's look at the charts from the largest to the smallest to see what they look like.

The financials look terrible. They're far below the 200 day simple moving average (SMA), the shorter SMAs are moving lower and prices are clearly looking for a bottom. This is a sector to avoid unless you are looking to short something.

Information Tech is doing pretty well; it's still in an uptrend that it started in the fall of 2006. However, prices are currently below the SMAs and the shorter SMAs are moving lower. This is a sector to keep a close eye on to see how it moves over the next few weeks.

Energy is clearly in a rallying market. Notice it is making higher highs and higher lows and it has a clear uptrend in place.


Notice the index gapped lower about a week ago. My guess is traders have started taking profits from energy's long rally as we approach the end of the year. This is something to keep an eye on as well.

Health care is in the middle of a giant, year-long triangle consolidation.

The industrial sector is also in the middle of a rally. But notice this index may have formed a double top and is trading right at the 200 day SMA.

So --

1.) One sector (financials) is broken. This is also the largest market sector so this is a problem.

2.) Energy, Industrials and Technology are in fair to good shape, but they need to be watched very closely.

3.) One sector -- health care -- is consolidating. This makes it a decent repository of safe money.

In other words, even the sectors that are in long-term rallies have to be watched closely right now.