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Tuesday
May222012

Sector Relative Strength

The charts below highlight the relative strength of various sectors versus the S&P 500.  These charts are updated for Bespoke Premium clients on a weekly basis as part of our Sector Snapshots report.  For each chart, a rising line indicates that the sector is outperforming the S&P 500, while a falling line indicates the sector is underperforming the overall market.

Regarding each of the individual sectors, there are some interesting trends worth pointing out.  For starters, although many retail stocks have been hit hard on earnings, the Consumer Discretionary sector has been holding up well and remains right near its highs for the year relative to the S&P 500.  Not surprisingly, while Consumer Discretionary stocks are holding up well, the Energy sector has been getting crushed.  Although the sector has seen a bounce over the last two days, it has a long way to go before getting back to even versus the market.

From late 2011 through late April of this year, the Financial sector saw a big rebound in its relative strength.  Since the start of May, however, the sector has taken a downward turn, which was only exacerbated by the JP Morgan (JPM) trading loss earlier this month.  

The Industrials sector has been a big underperformer over the last twelve months, but after a bounce in the last few days, the sector's relative strength is attempting to make a higher low.  Within the Industrials sector, the Transportation sector has also seen an improvement in its relative strength.  That sector's peak relative performance occurred earlier this year, and the market eventually followed suit.  With that in mind, bulls are hoping the recent improvement in the relative strength of the Transportation sector is a precursor of an improvement in the overall market in the months to come.

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