{"id":4960,"date":"2010-05-19T05:02:42","date_gmt":"2010-05-19T09:02:42","guid":{"rendered":"http:\/\/www.smbtraining.com\/blog\/?p=4960"},"modified":"2010-05-18T23:24:28","modified_gmt":"2010-05-19T03:24:28","slug":"sectors-and-money-flows-revisted","status":"publish","type":"post","link":"https:\/\/www.smbtraining.com\/blog\/sectors-and-money-flows-revisted","title":{"rendered":"Sectors and Money Flows Revisted"},"content":{"rendered":"

A few weeks ago I shared a charting technique that involved looking at ratio spreads between major sectors and the broad market.\u00a0 The market has had some significant moves since then, and I thought it might be interesting to revisit this topic today.\u00a0 For each chart below, consider three points:\u00a0 1) are there many extreme directional days showing a strong trend?\u00a0 2) Does the average (solid black line) show a clear trend?\u00a0 Does that trend have any recent inflection points?\u00a0 3)\u00a0 Also consider the pattern of the spread before and after the market high on 4\/26\/10 (marked on each chart with a vertical black line).\u00a0 These relationships are even more significant when you consider them in context of the overall big-picture technical structure of the market.<\/p>\n

I also received a few questions on how to construct these charts.\u00a0 For each chart you need to collect daily closing prices for SPY and the relevant sector.\u00a0 Create a number for each day that is the closing price of the sector divided by the closing price of the SPY, and then graph that new number.\u00a0 This can be done easily in Excel if your charting software will not do it, but updating every day can be a bit of a chore.<\/p>\n

\n

\"Sector<\/a>

Sector Spreads (click for full size)<\/p><\/div>\n

Energy \u2013 Weak, but not incredibly so, which may be surprising given the recent news and weakness in some specific names.\u00a0 Note that the market high was the inflection point for this spread.<\/p>\n

Basic Materials \u2013 Consistently weak and driving down.\u00a0 Moving average turned down before the market high.\u00a0 This, to me, was a clue at the time that the bull market was losing steam:\u00a0 one of the strongest sectors had rolled over before the broad market turned.<\/p>\n

Utilities\u2014The market high was a clear and sharp inflection point for this spread.\u00a0 Note the average turned around that point as well.\u00a0 This is a traditionally defensive sector, so strong money flows into this sector are probably indicative of risk aversion.<\/p>\n

Financials\u2014Ouch.\u00a0 What more can we say?\u00a0 Hit very hard before the market high and several times since.\u00a0 Today was also a bad day for this sector.<\/p>\n

Healthcare\u2014While not always considered to be a defensive sector, I have argued that it should be.\u00a0 The market high was the exact low for this spread.\u00a0 Coincidence?<\/p>\n

Industrials \u2013 This should catch our eye for its consistency.\u00a0 Leading the market before the market high and continues to be relatively stronger than the market.\u00a0 Notice how the spread becomes much more volatile after the market turns.\u00a0 (Does this make your head hurt a little?\u00a0 We are now considering the volatility <\/em>of the ratio <\/em>of a specific subset of the general market to the general market itself.\u00a0 Whew…)<\/p>\n

Consumer Discretionary \u2013 Is it coincidence that the market high was the exact high for this, probably the most cyclical of sectors?\u00a0 Perhaps, but we are seeing a consistent story build throughout this analysis.<\/p>\n

Consumer Staples\u2014And this, probably the most defensive of sectors, is showing exceptional strength relative to the broad market.\u00a0 Does this suggest a move to risk-aversion and a major shift in investor psychology?\u00a0 Taken alone, there probably is not enough information here to draw that conclusion, but a different picture emerges when we consider the overall structure in the market.<\/p>\n

Technology\u2014In-line and fairly unremarkable.<\/p>\n

I will leave it to you to draw conclusions, but I hope you see how this type of analysis can add a new dimension to your macro analysis.\u00a0 As a final exercise, it might be interesting to review the individual charts of these sectors for the same timeframes to see how the spread charts reveal relationships that are not always apparent on the charts themselves.<\/p>\n","protected":false},"excerpt":{"rendered":"

Another look at how sector relative strength has played out in recent market moves.<\/p>\n","protected":false},"author":388,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[943,453,15],"tags":[1011,927],"class_list":["post-4960","post","type-post","status-publish","format-standard","hentry","category-adam-grimess-blogs","category-trading_ideas","category-trading_theory","tag-relative-strength","tag-sectors","no-post-thumbnail"],"yoast_head":"\nSectors and Money Flows Revisted | SMB Training<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.smbtraining.com\/blog\/sectors-and-money-flows-revisted\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Sectors and Money Flows Revisted | SMB Training\" \/>\n<meta property=\"og:description\" content=\"Another look at how sector relative strength has played out in recent market moves.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.smbtraining.com\/blog\/sectors-and-money-flows-revisted\" \/>\n<meta property=\"og:site_name\" content=\"SMB Training Blog\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/smbcap\/\" \/>\n<meta property=\"article:published_time\" content=\"2010-05-19T09:02:42+00:00\" \/>\n<meta property=\"og:image\" content=\"http:\/\/www.smbtraining.com\/blog\/wp-content\/uploads\/2010\/05\/5-18-2010-8-45-17-PM.jpg\" \/>\n<meta name=\"author\" content=\"Adam\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@smbcapital\" \/>\n<meta name=\"twitter:site\" content=\"@smbcapital\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Adam\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"3 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/www.smbtraining.com\/blog\/sectors-and-money-flows-revisted#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.smbtraining.com\/blog\/sectors-and-money-flows-revisted\"},\"author\":{\"name\":\"Adam\",\"@id\":\"https:\/\/www.smbtraining.com\/blog\/#\/schema\/person\/dc89886f611b7f43996f76d73a99c964\"},\"headline\":\"Sectors and Money Flows Revisted\",\"datePublished\":\"2010-05-19T09:02:42+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/www.smbtraining.com\/blog\/sectors-and-money-flows-revisted\"},\"wordCount\":627,\"commentCount\":0,\"publisher\":{\"@id\":\"https:\/\/www.smbtraining.com\/blog\/#organization\"},\"image\":{\"@id\":\"https:\/\/www.smbtraining.com\/blog\/sectors-and-money-flows-revisted#primaryimage\"},\"thumbnailUrl\":\"http:\/\/www.smbtraining.com\/blog\/wp-content\/uploads\/2010\/05\/5-18-2010-8-45-17-PM.jpg\",\"keywords\":[\"relative strength\",\"sectors\"],\"articleSection\":[\"Adam Grimes's blogs\",\"Trading Ideas\",\"Trading Theory\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/www.smbtraining.com\/blog\/sectors-and-money-flows-revisted#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.smbtraining.com\/blog\/sectors-and-money-flows-revisted\",\"url\":\"https:\/\/www.smbtraining.com\/blog\/sectors-and-money-flows-revisted\",\"name\":\"Sectors and Money Flows Revisted | SMB Training\",\"isPartOf\":{\"@id\":\"https:\/\/www.smbtraining.com\/blog\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\/\/www.smbtraining.com\/blog\/sectors-and-money-flows-revisted#primaryimage\"},\"image\":{\"@id\":\"https:\/\/www.smbtraining.com\/blog\/sectors-and-money-flows-revisted#primaryimage\"},\"thumbnailUrl\":\"http:\/\/www.smbtraining.com\/blog\/wp-content\/uploads\/2010\/05\/5-18-2010-8-45-17-PM.jpg\",\"datePublished\":\"2010-05-19T09:02:42+00:00\",\"breadcrumb\":{\"@id\":\"https:\/\/www.smbtraining.com\/blog\/sectors-and-money-flows-revisted#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/www.smbtraining.com\/blog\/sectors-and-money-flows-revisted\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.smbtraining.com\/blog\/sectors-and-money-flows-revisted#primaryimage\",\"url\":\"http:\/\/www.smbtraining.com\/blog\/wp-content\/uploads\/2010\/05\/5-18-2010-8-45-17-PM.jpg\",\"contentUrl\":\"http:\/\/www.smbtraining.com\/blog\/wp-content\/uploads\/2010\/05\/5-18-2010-8-45-17-PM.jpg\"},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/www.smbtraining.com\/blog\/sectors-and-money-flows-revisted#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/www.smbtraining.com\/blog\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Sectors and Money Flows Revisted\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/www.smbtraining.com\/blog\/#website\",\"url\":\"https:\/\/www.smbtraining.com\/blog\/\",\"name\":\"SMB Training Blog\",\"description\":\"Lessons from the trading desk\",\"publisher\":{\"@id\":\"https:\/\/www.smbtraining.com\/blog\/#organization\"},\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/www.smbtraining.com\/blog\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"},{\"@type\":\"Organization\",\"@id\":\"https:\/\/www.smbtraining.com\/blog\/#organization\",\"name\":\"SMB Training\",\"url\":\"https:\/\/www.smbtraining.com\/blog\/\",\"logo\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.smbtraining.com\/blog\/#\/schema\/logo\/image\/\",\"url\":\"https:\/\/www.smbtraining.com\/blog\/wp-content\/uploads\/2022\/07\/Logo-e1658419502954.png\",\"contentUrl\":\"https:\/\/www.smbtraining.com\/blog\/wp-content\/uploads\/2022\/07\/Logo-e1658419502954.png\",\"width\":230,\"height\":81,\"caption\":\"SMB Training\"},\"image\":{\"@id\":\"https:\/\/www.smbtraining.com\/blog\/#\/schema\/logo\/image\/\"},\"sameAs\":[\"https:\/\/www.facebook.com\/smbcap\/\",\"https:\/\/x.com\/smbcapital\",\"https:\/\/www.youtube.com\/user\/smbcapital\"]},{\"@type\":\"Person\",\"@id\":\"https:\/\/www.smbtraining.com\/blog\/#\/schema\/person\/dc89886f611b7f43996f76d73a99c964\",\"name\":\"Adam\",\"url\":\"https:\/\/www.smbtraining.com\/blog\/author\/aceman\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"Sectors and Money Flows Revisted | SMB Training","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/www.smbtraining.com\/blog\/sectors-and-money-flows-revisted","og_locale":"en_US","og_type":"article","og_title":"Sectors and Money Flows Revisted | SMB Training","og_description":"Another look at how sector relative strength has played out in recent market moves.","og_url":"https:\/\/www.smbtraining.com\/blog\/sectors-and-money-flows-revisted","og_site_name":"SMB Training Blog","article_publisher":"https:\/\/www.facebook.com\/smbcap\/","article_published_time":"2010-05-19T09:02:42+00:00","og_image":[{"url":"http:\/\/www.smbtraining.com\/blog\/wp-content\/uploads\/2010\/05\/5-18-2010-8-45-17-PM.jpg","type":"","width":"","height":""}],"author":"Adam","twitter_card":"summary_large_image","twitter_creator":"@smbcapital","twitter_site":"@smbcapital","twitter_misc":{"Written by":"Adam","Est. reading time":"3 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/www.smbtraining.com\/blog\/sectors-and-money-flows-revisted#article","isPartOf":{"@id":"https:\/\/www.smbtraining.com\/blog\/sectors-and-money-flows-revisted"},"author":{"name":"Adam","@id":"https:\/\/www.smbtraining.com\/blog\/#\/schema\/person\/dc89886f611b7f43996f76d73a99c964"},"headline":"Sectors and Money Flows Revisted","datePublished":"2010-05-19T09:02:42+00:00","mainEntityOfPage":{"@id":"https:\/\/www.smbtraining.com\/blog\/sectors-and-money-flows-revisted"},"wordCount":627,"commentCount":0,"publisher":{"@id":"https:\/\/www.smbtraining.com\/blog\/#organization"},"image":{"@id":"https:\/\/www.smbtraining.com\/blog\/sectors-and-money-flows-revisted#primaryimage"},"thumbnailUrl":"http:\/\/www.smbtraining.com\/blog\/wp-content\/uploads\/2010\/05\/5-18-2010-8-45-17-PM.jpg","keywords":["relative strength","sectors"],"articleSection":["Adam Grimes's blogs","Trading Ideas","Trading Theory"],"inLanguage":"en-US","potentialAction":[{"@type":"CommentAction","name":"Comment","target":["https:\/\/www.smbtraining.com\/blog\/sectors-and-money-flows-revisted#respond"]}]},{"@type":"WebPage","@id":"https:\/\/www.smbtraining.com\/blog\/sectors-and-money-flows-revisted","url":"https:\/\/www.smbtraining.com\/blog\/sectors-and-money-flows-revisted","name":"Sectors and Money Flows Revisted | SMB Training","isPartOf":{"@id":"https:\/\/www.smbtraining.com\/blog\/#website"},"primaryImageOfPage":{"@id":"https:\/\/www.smbtraining.com\/blog\/sectors-and-money-flows-revisted#primaryimage"},"image":{"@id":"https:\/\/www.smbtraining.com\/blog\/sectors-and-money-flows-revisted#primaryimage"},"thumbnailUrl":"http:\/\/www.smbtraining.com\/blog\/wp-content\/uploads\/2010\/05\/5-18-2010-8-45-17-PM.jpg","datePublished":"2010-05-19T09:02:42+00:00","breadcrumb":{"@id":"https:\/\/www.smbtraining.com\/blog\/sectors-and-money-flows-revisted#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/www.smbtraining.com\/blog\/sectors-and-money-flows-revisted"]}]},{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.smbtraining.com\/blog\/sectors-and-money-flows-revisted#primaryimage","url":"http:\/\/www.smbtraining.com\/blog\/wp-content\/uploads\/2010\/05\/5-18-2010-8-45-17-PM.jpg","contentUrl":"http:\/\/www.smbtraining.com\/blog\/wp-content\/uploads\/2010\/05\/5-18-2010-8-45-17-PM.jpg"},{"@type":"BreadcrumbList","@id":"https:\/\/www.smbtraining.com\/blog\/sectors-and-money-flows-revisted#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/www.smbtraining.com\/blog"},{"@type":"ListItem","position":2,"name":"Sectors and Money Flows Revisted"}]},{"@type":"WebSite","@id":"https:\/\/www.smbtraining.com\/blog\/#website","url":"https:\/\/www.smbtraining.com\/blog\/","name":"SMB Training Blog","description":"Lessons from the trading desk","publisher":{"@id":"https:\/\/www.smbtraining.com\/blog\/#organization"},"potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/www.smbtraining.com\/blog\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"},{"@type":"Organization","@id":"https:\/\/www.smbtraining.com\/blog\/#organization","name":"SMB Training","url":"https:\/\/www.smbtraining.com\/blog\/","logo":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.smbtraining.com\/blog\/#\/schema\/logo\/image\/","url":"https:\/\/www.smbtraining.com\/blog\/wp-content\/uploads\/2022\/07\/Logo-e1658419502954.png","contentUrl":"https:\/\/www.smbtraining.com\/blog\/wp-content\/uploads\/2022\/07\/Logo-e1658419502954.png","width":230,"height":81,"caption":"SMB Training"},"image":{"@id":"https:\/\/www.smbtraining.com\/blog\/#\/schema\/logo\/image\/"},"sameAs":["https:\/\/www.facebook.com\/smbcap\/","https:\/\/x.com\/smbcapital","https:\/\/www.youtube.com\/user\/smbcapital"]},{"@type":"Person","@id":"https:\/\/www.smbtraining.com\/blog\/#\/schema\/person\/dc89886f611b7f43996f76d73a99c964","name":"Adam","url":"https:\/\/www.smbtraining.com\/blog\/author\/aceman"}]}},"_links":{"self":[{"href":"https:\/\/www.smbtraining.com\/blog\/wp-json\/wp\/v2\/posts\/4960","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.smbtraining.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.smbtraining.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.smbtraining.com\/blog\/wp-json\/wp\/v2\/users\/388"}],"replies":[{"embeddable":true,"href":"https:\/\/www.smbtraining.com\/blog\/wp-json\/wp\/v2\/comments?post=4960"}],"version-history":[{"count":0,"href":"https:\/\/www.smbtraining.com\/blog\/wp-json\/wp\/v2\/posts\/4960\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.smbtraining.com\/blog\/wp-json\/wp\/v2\/media?parent=4960"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.smbtraining.com\/blog\/wp-json\/wp\/v2\/categories?post=4960"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.smbtraining.com\/blog\/wp-json\/wp\/v2\/tags?post=4960"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}