Friday, January 31, 2014

Sector Analysis: Utilities Out in Front

Not surprisingly, there has been a dramatic fall in the level of bullishness within sectors over the past 10 days. However, one sector which has managed to keep its nose in front is Utilities ($XLU). Select the 'Utilities' option in the bubble chart below (don't work in Firefox - talk to Google/Firefox as to why!), and watch how it moves from a middling, slightly under-performing, sector to sector leader.


The trails are also highlighted in this image below:

The red bubble colour represents hot volume action (accumulation), the blue is cold.  Value buyers could probably take a sniff at Staples ($XLP) and Discretionary ($XLY); these are the two large blue bubbles on the far left.  Ordinarily, I like to see bullishness dip below 10% before sectors are worth a 'buy', but at 17% there is probably enough merit with the broader S&P looking like it's attempting a swing low.

The next bubble chart plots bullish momentum versus trend strength. Here, trend followers will want to look for sectors which go move from the bottom left of this chart to the top right.

Utilities ($XLU) kicked off its run to the top right-hand-corner from a position of cool momentum, but overall bullish trend - into a hot house of bullish trend and momentum.  Again, the blue bubbles in the bottom left are lacking accumulation, momentum and bullish trend, but are ideally positioned for an advance as a low risk buying opportunity. The three larger bubbles clustered in the lower left are Discretionary ($XLY), Staples ($XLP) and Materials ($XLB).



If you are looking for a time to sell. I like to profit take when bullishness (the x-axis of the first chart) breaks above 90%.  Utilities ($XLU) got close on January 22nd, but yesterday's gain took out the January 22nd swing high with bullishness only at 72%. This should mean there is more upside to follow.

If you want to track these charts for your own benefit, you can find a permanent link for them here.

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Dr. Declan Fallon is the Senior Market Technician and Community Director for Zignals.com.
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