Sector Cumulative A/D Lines

Since mid-February, we have made numerous comments regarding the market's strong breadth off the February lows.  While the S&P 500 remains below its January highs, breadth breezed right through those levels early last week.  But how has breadth fared within sectors?  In the charts below, we provide the cumulative advance-decline (A/D) lines for each of the ten S&P 500 sectors.  However, given that the number of stocks in each sector varies, the A/D lines below are based on the daily net percentage of stocks rising in each sector.  This allows us to make apples to apples comparisons between sectors.

While cumulative breadth for the S&P 500 is well above its January levels, individual sectors have fared differently.  Currently, there are five sectors where breadth has made new highs.  These sectors include Consumer Discretionary, Consumer Staples, Financials, Industrials, and Technology.  As one might expect in an environment where the market is rallying, the five sectors where breadth is lagging are made up mostly of defensive sectors (Health Care, Telecom Svcs, and Utilities).  However, two sectors that stick out are Energy and Materials.  In prior rallies, these sectors have led to the upside, so their underperformance in this rally suggests that investors are rotating out of the weak dollar plays.

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