Offensive sectors took a hard hit in January. Offensive sectors include technology, consumer discretionary, industrials and finance. I call them the offensive sectors because their participation is key to a bull market. Technology represents growth and the appetite for risk. Consumer discretionary is the most economically sensitive sector. Industrials represent big global manufacturers like GE, United Tech, 3M, Boeing and Caterpiller. Finance represents the banking system. The first chart shows the technology SPDR (XLK) as the weakest of the offensive sectors. In fact, it is the weakest all sectors in 2010. Relative weakness in technology reflects risk aversion and a preference for safety (defense). The industrials sector is holding up the best of the four (thanks to a gain from GE on Friday). Healthcare, utilities and consumer staples make up the defensive sectors shown in the second chart. These are the sectors investors turn to in times of uncertainty. Utilities are down sharply. Consumer staples are also down, but not near as much as technology or consumer discretionary. The healthcare sector remains the star performer for the year, and the only sector showing a year-to-date gain.

100122xlp Click this chart for details
Arthur Hill
About the author: , CMT, is the Chief Technical Strategist at Focusing predominantly on US equities and ETFs, his systematic approach of identifying trend, finding signals within the trend, and setting key price levels has made him an esteemed market technician. Arthur has written articles for numerous financial publications including Barrons and Stocks & Commodities Magazine. In addition to his Chartered Market Technician (CMT) designation, he holds an MBA from the Cass Business School at City University in London. Learn More
Subscribe to ChartWatchers to be notified whenever a new post is added to this blog!
comments powered by Disqus