Sum of the Parts Analysis for the S&P 500


The whole is only as strong as the sum of its parts. Applying this logic to the stock market, the S&P 500 represents the whole and the nine sector SPDRs represent the sum of the parts. Let's see just how strong the parts of the S&P 500 are. The chart below shows SPY and the nine sector SPDRs. The sector charts are sorted by the percentage above the 200-day EMA with the highest at the top (XLF) and the lowest at the bottom (XLP). First, note that SPY is above its rising 200-day EMA and in a clear uptrend. Second, note that six of the nine sector SPDRs are above their 200-day EMAs and the 200-day EMAs are rising for all six. 

The chart also shows the weightings for each sector and the six bullish sectors account for around 68% of the S&P 500. This is enough to keep the market in an uptrend overall. Of these six, the Technology SPDR (XLK) is the closest to its 200-day EMA and the one to watch. Three of the nine sector SPDRs are below their 200-day EMAs, but not by much. These three represent around 26% of the S&P 500 and they are weighing on the market. Note that REITs 2.7% and Telecom 2.4% were excluded from these calculations. REITs were part of the finance sector and most telecom stocks are part of the technology sector. 

Thanks for tuning in and have a good weekend!
--Arthur Hill CMT

Plan your Trade and Trade your Plan 

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
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