Do sectors behave differently than one another?

Discussion in 'Trading' started by mag, Mar 9, 2008.

  1. mag


    I know that sectors (energy, financials, etc.) perform differently at any given time but do they have any distinct differences in how they behave from a technical analysis point of view?

    I know that the technology sector took a major hit early this decade which would make it seem that it can be highly volatile but is that true or is it just as likely for this to happen to any sector?

    I'm not asking for specifics, I just want to know whether or not it is worth my time to look at the sectors as individuals with distinct characteristics or just as loose categories of stocks that tend to move together.

    Sorry if this question seems dumb, I haven't read much about the different sectors of the market.
  2. 1) You could look at how a sector may rally slowly and fall quickly.
    2) How one sector correlates to another seemingly unrelated sector.
    3) After a sector declines, how quickly each of the issues rally back up.
    4) The degree of correlation of the issues in a sector, i.e. do they move in lock-step or is there some negative correlation.
  3. Joab


    Unless the exact same participants were in the other sector then price action will be different.

    How much will depend on many factors and conditions.

    It never hurts to become intimate with a stock, sector or industry before trading with $$$.

    That being said a stock in play is in play regardless of the details.
  4. I find different sectors sometimes show different price behavior.
  5. Some sectors tend to be less correlated to the SP500's overall performance than others. I suggest going through the 8 major "SPDR" sectors and comparing them to the SP500. What's under-/overperforming in what environment.

    Two extreme examples:



    Overview of the sector SPDR ETFs:

    Charting stocks/ETFs against the SP500 (Symbol: SPY): (or any charting software)
  6. I've traded sectors forever.
    Gold, energy and tech are the most volatile. Utilities and REITs (obviously) are the least, but with exceptions.
    Some correlations are obvious: gold correlates negatively (though not always) with the SP 500.
    Some are less obvious: gold correlates positively with utilities. This makes sense when you realize that gold pays no interest, and so does well when interest rates are low, which coincidentally would be when the Fed is in the middle of a rate-cutting campaign, like now. Utilities of course would do well at the same time, for the most part, since that would be when their dividends would become more valuable.
    Best thing to do is run your own stats on all the different sectors. Nothing like seeing the results for yourself.
  7. Is this a topic for Technical Analysis or for Market Inter-relationships?
  8. you can place your sectors on medved quotetracker and use the seperator stock symbol ( --- ), and notes column to tag sectors. open the inline mini charts to a decent font size. one way you can watch what stocks/and stocks within a sectors are doing.