My technician friends have been showing me breakouts and the snapping of downtrends in all manner of cyclical sectors this week – most notably Chessnwine’s work with the Chemicals sector and some of our own internal screens on the oil names we’re starting to get heavier on.
Here’s Brendan Conway at Barron’s column Focus On Funds with a bit of quantification:
It’s still a short period, but there’s been a notable pickup in the battered cyclical sectors of the market, part of it crammed into Thursday’s session. Meanwhile, the 2013 leaders — health care, utilities and consumer staples — are recent laggards.
The S&P 500′s (SPY) materials sector, the year’s second-worst performing group, enters Friday as the week’s top gainer, rising 4.5%. Coming in second place was energy, the year’s third-weakest sector, with a 3.2% gain. On Thursday, Materials Select Sector SPDR fund (XLB) jumped 1.1% to $39.46, a two-week high, though the Energy Select Sector SPDR fund (XLE) inched six cents higher to $77.31. (Figures reflect market prices on FactSet Research Systems.)
If you’re skating to where the puck will be, it’s not in consumer staples and utilities. It’s probably in the horrifically underperforming materials space. Is this nascent rally in the group the start of it or just a headfake?