The day after we posted Looking for a Bottom? Start with Sectors, the market tested a new 52-week low and sector performance was telling.
The S&P 500 ETF (SPY) traded as low as $74.34 on November 21 before bouncing back to finish the day at $79.52.
6 of the 9 major sectors also hit a new low on Friday creating the need to reset our thinking on sector outlooks.
October 10th Group – Mixed Results
October 10 was the 7th straight day of a sell-off. The market bottom was followed by a large bounce-back by the end of the next trading day.
On October 10, 4 sectors achieved 52 week lows:
Two of the four sectors failed the November 21 test. XLE and XLU stayed above the October 10 lows while XLP and XLV set new lows.
Conclusion: The two sectors that set 52-week lows on October 10, XLE and XLU, are now clearly outperforming the rest of the market and should receive preference over their peers.
November 21st Group – Potential to Set New Lows
Six sectors hit their 52-week low on November 21 and one set a new low on November 20th.
Consumer Staples Select Sector SPDR Fund (XLP)
Health Care Select Sector SPDR Fund (XLV)
The Materials sector actually hit its 52-week low on November 20.
Conclusion: The seven sectors that set 52-week lows on November 20 and 21 still have the potential to go lower. The next sell-off in the market should provide more insight on this group.
– Michael Vermillion
November 24, 2008