This Market is Energized not a Utility
- Posted by Greg Harmon
- on January 24th, 2013
Need another obscure measure to determine if the market is doing well? Straight from the tool shed the ratio of Energy Sector ($XLE) to the Utilities Sector ($XLU) is one that not many use. The ratio chart below shows that it acts as a good proxy for the S&P 500 ($SPX, shaded area). This makes some sense as it also represents the flow of money between defensive utility stocks that pay steady dividends and stocks that generate much of their performance off of riskier commodities. But hidden in this chart is a more disciplined method for discerning whether it is time to be long the
market or not. Where the ratio is a decent fit for the S&P 500, the 20 day Simple Moving Average (SMA) of the ratio viewed as a trigger gives a great signal for being long or short the market. The blue circles show the last 8 times the ratio crossed the 20 day SMA. Each time has been a good signal to either enter long or short in the S&P 500. And where is it now? Pointing long!
Join the Dragonfly Capital Views Premium Membership
Sign up here to get deeper analysis and nearly 50 trade ideas every week.
If you like what you see above sign up for deeper analysis and trading strategy by using the Get Premium button above. As always you can see details of individual charts and more on my StockTwits page.
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.blog comments powered by Disqus
Gregory W. Harmon CMT, CFA, has traded in the Securities markets since 1986. He has held senior positions including Head of Global Trading, Head of Product Development, Head of Strategy and Director of Equity. (More)
Dragonfly Capital Updates
- Premium Earnings 6-19-13
- This Fed Statement Should Be Important
- Stay Crafty When You Are Thirsty
- Premium Earnings 6-18-13 Part 2: FedEx
- Premium Earnings 6-18-13
- Risk On or Just Baby Steps to the Sleeping Bear’s Cave
- Arch Coal is Worthless
- Premium Earnings 6-17-13
- Top Trade Ideas for the Week of June 17, 2013: Bonus Idea
- Top Trade Ideas for the Week of June 17, 2013: The Rest