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Sorry my promise of the article on "demand of credit" will be delayed to tomorrow. Today I have sth to say more related to trading instead of fundamental analysis.
Sector performance, in other words, who leads and who lags, is a very important intrinsic strength indicator of the market.
In S&P500, what counts most is: xlk(technology), xlv(healthcare), xle(energy), xlf(financials), xly(consumer discretionary/cyclical), xlp(consumer staples/noncyclical), and xli(industrials). They have most weight and very clear relation to the corresponding part of real economy. xly/xli/xlk are usually real economy related, especially xly/xli, while xlv/xlp is usually considered as defensive sector, especially xlv, which is a very good contrarian to the market(the chart of the ratio of xlv over spy).
For every intermediate turn of a market, one should pay attention to the central engine of the rally/drop, who leads the market in time and amplitude.
from March, xly/xlf/xli leads the market in amplitude, while xly also leads in time. So from the market behavior, they are no wonder the leaders. This also be confirmed by media as they propganda for the so called "green shoot" which is the economy related.
While the year of 2008 was a year of financial crisis, so the market focus point is xlf, and you can see every time xlf lead the market. Now the financial crisis turns into a recession, so the main argueing point of the market is if the recovery is on the way, no wonder xly(consumption America) will be the first and xli/xlk/xlf the second in the battlefield of bears and bulls.
Now where are we? With all economy related stuff lagging to the market, while the contrarian like xlv/xlp lead the rally recent days, conclusion can be drawn that the central engine of the March rally: the economy recovery story, has gone.
btw: if you like this article, please go to http://blog.sina.com.cn/pinball1980 to give me a click, thanks :) |
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