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Chart of the Day: Sector Analysis

I find it useful to drill down into each major sector and look at the behavior of individual names. One way to do this (and one I highly recommend) is to flip through charts of the entire S&P 500 every day, but that is time consuming and not the right answer for all traders. Another way, which I also do daily, is to look at summary statistics for each sector. The table above shows an analysis of most of the components of the S&P 500 by sector. (Most numbers are the averages of those values for the individual names in the sector, with the exception of the Vprem, with is premium of the monthly – quarterly historical volatilities for the relevant sector ETF.) RS is a relative strength measure, STH, STL, LTH, LTH show the percentage of stocks making short term (20 day) and long term (252 day) highs and lows on this day in the sector. C%MtnRng and C%YrRng shows the average value of the closing price as a percentage of the monthly or yearly range—a rough relative strength measure. In a broad market decline, pullback, pause or consolidation, it is interesting to see which sectors hold up best, and which show early signs of new upside leadership—bets placed in leading sectors are often rewarded handsomely when (if) the market turns and resumes its rally. There is valuable information here; how you incorporate it in your own trading plan is worth some careful consideration.

AdamHGrimes

Adam Grimes has over two decades of experience in the industry as a trader, analyst and system developer. The author of a best-selling trading book, he has traded for his own account, for a top prop firm, and spent several years at the New York Mercantile Exchange. He focuses on the intersection of quantitative analysis and discretionary trading, and has a talent for teaching and helping traders find their own way in the market.

This Post Has 3 Comments

  1. Chris 12/05/2013

    Are there any recommended sources for above sector statistics?

    1. Adam Grimes 12/05/2013

      I calculate these myself. We publish stats similar to this in our research, but only when they are particularly relevant. If there’s a data provider that provides stats like this I don’t know about it.

    2. Jochen Helly 12/06/2013

      I am using finviz and building something similar, actually more detailed, with the screener (free EOD data), then downloading into excel, and applying some formulas and pivots to get the metrics I need. Takes less than 1min. My main problem is to take actionable decisions from it, as I am often in doubt whether strength in some sector/group may be a signal for further strength and trend continuation or for overextension and mean reversion..

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