Sector Analysis Using Pure Price Action

Discussion in 'Journals' started by Gringo, Sep 29, 2013.

  1. Gringo


    This journal is to keep an eye on the industry sectors and perform sector analysis using pure price action. Although there are many wonderful methods available for performing an analysis, it is expected that those contributing to this thread will stick to pure price action while explaining their reasoning. Pure price action means that there isn't going to be much talk of any indicators or moving averages. It also means we won't be using fundamental analysis to determine the health of the sectors.

    The analysis is going to be be based on the following five criteria:
    • price
    • volume
    • support/resistance
    • supply/demand lines
    • trend
    Using the freely available Bigcharts or Stockcharts one can easily look at the 9 major sectors for Dow Jones or the S&P.

    Dow Jones U.S. Sectors

    Oil & Gas (DJUSEN)
    Basic Materials (DJUSBM)
    Industrials (DJUSIN/XLI)
    Consumer Goods (DJUSNC)
    Health Care (DJUSHC/XLV)
    Consumer Services (DJUSCS)
    Telecommunications (DJUSTL)
    Utilities (DJUSUT)
    Financials (DJUSFN)
    Technology (DJUSTC)

    S&P Sectors

    Energy Sector (XLE)
    Materials Sector (XLB)
    Industrials Sector (XLI)
    Consumer Staples Sector (XLP)
    Health Care Sector (XLV)
    Cyclicals Sector (XLY)
    Utilities Sector (XLU)
    Financials Sector (XLF)
    Technology Sector (XLK)

    The hope is that via the analysis of these sectors we'll have a better view of the cross section of the economy and its health.

    Lets aim to learn from this thread and attempt to post in a manner that is informative and educational.

  2. eurusdzn


    Hi Gringo,

    I enjoy reading DbPhoenix and the contributors to the PA style. I look forward to your thread also. I have the sectors you list on my list. I also have a few more that are industry,rate,market or commodity specific.
    It may be that you want to look at the nuance between some highly correlated sectors
    (Im not saying the entire list is correlated) but , speaking only for myself, i would like to see these methods applied to a more inclusive list.
    A list might include these or similar products:

    IYR Real estate
    TMF As a proxy for 20+ treasury bond
    XHB Homebuilders

    IBB Biotech

    EEM Emerging market
    DJX Long Japan stocks and short Yen in one product

    UCO Oil
    BOIL Nat gas

    These and /or other similar products might make for more dynamic PA analysis, (no fundamentals as most will probably die if another opinion is heard)
    Finally, what is the time length of the bars you will be using?
  3. TMF As a proxy for 20+ treasury bond

    Why TMF, surely TLT is a better choice?

    Jeffrey Skeldon
    Lewisville (Dallas/Fort Worth), Texas.
  4. Firm believer of sector analysis to get better views of the markets, plus have a great deal of respect for DB, best of luck with your thread, ignore the trolls and best wishes.

  5. Who is 'DB"?
  6. dbphoenix


    I like this guy already. :)

    I'll point out at the beginning that this journal has nothing to do with me. It was initiated by Gringo, maybe at the urging of others but he's demonstrated interest in this elsewhere at other times. I will comment only when asked to do so.
  7. Georgi90


    but who are you really... some muchacho :confused:
  8. Gringo


    Db is famous for turning muchachos into hombres. :)

  9. Gringo


    First analysis is of the energy sector. For that I have used XLE. I could have used DJUSEN and the analysis would have been almost the same. I say almost because there are some differences. As an example the current price of XLE is above the peak in 2008. In case of DJUSEN the price is still below it. It changes the relative strengths of these indexes. I am guessing the difference is due to the underlying securities that make up these indexes. Perhaps the mix is different leading to a slightly different outcome.

    As some would notice the chart used is using line as opposed to bars. It is simply to show that having bars to represent price or a line doesn't really make much of a difference. There are advantages to each display of price. I'll be using both at different occasions. Here the XLE used is weekly to show the larger term picture of what has been going on. When the price displays a characteristic that is interesting and requires closer scrutiny ,I'll probably delve into the daily chart to get a closer look.

    Here's XLE Weekly:


  10. niko


    Damn! So much work to do, please don't finish all the sectors without me :D.
    #10     Sep 30, 2013