Monday, March 31, 2014

Sector Rotation in March

by Bespoke

Below is a good look at sector rotation in the month of March.  As shown, the S&P 500 as a whole had 68% of its stocks above their 50-day moving averages at the end of February, and 67% are above their 50-days with one day left in March -- basically unchanged.  On a sector basis, however, there has been a real shift over the last month. 

As shown, Health Care, Consumer Discretionary and Technology were big leaders coming into March, and they all had more than 70% of their stocks abover their 50-days.  These three sectors have been weak lately, though, and now they have the worst breadth readings in the market.  Health Care is a real standout due to Biotech's recent fall.  At the end of February, 83% of Health Care stocks were above their 50-days, ranking it second behind Utilities for the strongest breadth reading.  Now just 46% of Health Care stocks are above their 50-days, which is the worst reading of any sector. 

Aside from Utilities, whose reading is unchanged at 90% month-over-month, the other five sectors with breadth levels currently stronger than the overall market all had below-market readings at the end of February.  Consumer Staples, Energy and Financials have all seen big bounces is the percentage of stocks above their 50-days this month.

March has been a month of rotation out of what had been working into what had not been working.  As we head into April, the big question is whether this shift is a short-term mean reversion trade or the start of a longer-term trend.  To find out which way Bespoke thinks this market is headed, be sure to check out our 30-page Bespoke Report newsletter published Friday after the close.  Read by the largest institutions on down to beginner investors, our newsletter stands as one of the most widely read pieces on "the street" each week.  Get it now with a 5-day free trial to either our Bespoke Newsletter, Bespoke Premium or Bespoke Institutional services.

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