Continue reading Is this the 'Great Recession' and how will we get out of it?

Is this the 'Great Recession' and how will we get out of it? originally appeared on BloggingStocks on Thu, 12 Feb 2009 16:50:00 EST. Please see our terms for use of feeds.

One way to gauge market breadth is to compare the performance of an index where each constituent member is weighted equally to its more traditional, capitalization-weighted counterpart.

When benchmark measures are rising but fewer shares are taking part, that often signals that an advance is nearing its sell-by date.

As far as the S&P 500 index goes, such a divergence has been in effect since late in the summer. That's when the ratio of the equal-weighted version to the conventional version began to roll over.

When it comes to individual sectors, however, there has been considerable variation between them.

Over the past year, for example, the performance of the health care, energy and industrial sectors has been relatively broad-based, while information technology, telecom services and materials group returns have been skewed in favor of large cap shares.

Arguably, because the latter three sectors have lacked the breadth of participation of the former three, that could mean they are especially vulnerable should the market resume the correction that kicked off in mid-October.

Michael Panzner is a 25-year veteran of the global stock, bond, and currency markets and the author of Financial Armageddon: Protecting Your Future from Four Impending Catastrophes and The New Laws of the Stock Market Jungle.

Sector breadth tells an interesting story originally appeared on BloggingStocks on Thu, 13 Dec 2007 13:33:00 EST. Please see our terms for use of feeds.

In that case, Friday happens to be the best day of the week, both in absolute terms and relative to the market, when the median daily performance of all the various S&P 500 economic sectors are taken into account. The winning group? Energy, with an average return of 0.21% and 0.17%, respectively. Coming in a close second, in nominal terms at least, is the information technology group, with a gain of 0.21% on Wednesdays and 0.20% on Mondays.

As far as which day of the week is the worst for any particular sector, there are two contenders for the crown. In absolute terms, Monday has been the laggard, with the energy sector declining by an average of 5 basis points over the course of the past decade. In terms of relative performance, however, Wednesdays are at the bottom, dragged down by the -0.12% median return of financial shares.

Continue reading Some days are better for investing, as far as sectors are concerned

Some days are better for investing, as far as sectors are concerned originally appeared on BloggingStocks on Mon, 22 Oct 2007 13:40:00 EST. Please see our terms for use of feeds.

By most accounts, last Friday's discount rate cut by the Federal Reserve was intended to benefit the beleaguered credit markets, and by extension, lenders and other financial institutions that have suffered as a result of the current upheaval.

Given that, it is interesting that the biggest beneficiaries in performance terms since Thursday's close have been the materials, energy, and industrials sectors.

Some might say that means equity investors interpreted Friday's action as a routine step towards eventual monetary policy easing -- rather than an abrupt policy reversal to address a quickening credit crisis.

More cynically, it may have been seen as just another opportunity to re-enter or add to positions that have been in vogue among the leveraged speculation crowd for quite a while now.

Continue reading Equity traders still missing the big picture?

Equity traders still missing the big picture? originally appeared on BloggingStocks on Tue, 21 Aug 2007 12:40:00 EST. Please see our terms for use of feeds.

Today's early rally brings the S&P 500 index a step closer to the March 24, 2000 record closing high of 1527.36. Despite all the hoopla, it's worth keeping in mind that the benchmark measure is essentially unchanged over the course of the past seven years.

Still, the round trip from the bubble's peak does mask a dramatic contrast in the fortunes of the index's 10 underlying sectors. For example, energy shares (which have an equivalent exchange-traded fund, or ETF (AMEX: XLE)) have more than doubled over the period, while the information technology group (AMEX: XLK) has lost nearly two-thirds of its value.

This should drive home the point that while moves in the major indices offer insights on the "pulse" of the overall market, it's often what occurs below the surface -- at the sector and individual share level -- that matters most to investors in the longer run.

Michael Panzner is a 25-year veteran of the global stock, bond, and currency markets and the author of Financial Armageddon: Protecting Your Future from Four Impending Catastrophes and The New Laws of the Stock Market Jungle: An Insider's Guide to Successful Investing in a Changing World.

S&P 500 round trip: What lies beneath originally appeared on BloggingStocks on Thu, 03 May 2007 15:15:00 EST. Please see our terms for use of feeds.

Based on an analysis of quarterly sector performance during the period 1995-2006, S&P 500 economic sectors that perform best in any given quarter tend to fare less well in the three months that follow. In contrast, groups that perform worst tend to improve their relative standing in the subsequent span.

So far this period, utilities and materials have been the best performers by a relatively wide margin. The laggards have been financials and consumer discretionary shares. If past trends hold true, it might make sense to shift sector allocations for the next three months away from shares in the winning sectors towards those in groups that finished at the bottom of the pack.

It's worth noting that this is a relative performance strategy. Some or all of the ten sectors could finish higher or lower next quarter, depending on what happens to the overall market.

Sector	Quarter-to-Date Return %
=================	====
Utilities	8.78
Materials	7.92
Telecom Services	4.80
Energy	2.07
Consumer Staples	0.99
Industrials	0.44
Health Care	0.24
=================	====
S&P 500	-0.08
=================	====
Information Technology	-1.02
Consumer Discretionary	-1.33
Financials	-3.86

Michael Panzner is a 25-year veteran of the global stock, bond, and currency markets and the author of Financial Armageddon: Protecting Your Future from Four Impending Catastrophes and The New Laws of the Stock Market Jungle: An Insider's Guide to Successful Investing in a Changing World.

A contrarian sector strategy for the second quarter originally appeared on BloggingStocks on Thu, 29 Mar 2007 11:56:00 EST. Please see our terms for use of feeds.