But What is it Showing?
The chart above shows the collective seasonality of all 11 sectors in the S&P 500.
To get there, I collected the numbers from the seasonality chart (which is available on the site) for every sector and the S&P 500 over the past 20 years (the maximum lookback period). I then punched all these numbers (288 indeed) into a spreadsheet and created this 3D-column chart. By visualizing these data in this way, we can get a view of the seasonality across the entire universe.
Seasonality is a very helpful tool/metric to get some guidance on what usually/on average happens with a sector on a forward-looking basis. As with all tools that we have in our toolkit, there is no certainty. They are all providing us with pieces of the puzzle.
Combining with RRG
The combination of various tools is what provides us with insight. Obviously, I want to combine things with a Relative Rotation Graph. When I run the RRG for US sectors, XLV seems well positioned to enter the new year on a positive note.
Of course, there are still a few weeks left in this year, but the combination of a strong rotation on the Relative Rotation Graph and an outperformance of SPY in 14 out of 20 months (of January) over the last 20 years (average outperformance 1.2%) suggests a good relative start in 2020 for the Health Care sector.
There are a lot more possibilities with this type of visualization, which I am planning to show/explain in a separate RRG blog or Sector SpotLight video soon. Stay tuned.
Julius de Kempenaer
Senior Technical Analyst, StockCharts.com
Creator, Relative Rotation Graphs
Founder, RRG Research
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