Objective research to aid investing decisions

Value Investing Strategy (Strategy Overview)

Allocations for December 2024 (Final)
Cash TLT LQD SPY

Momentum Investing Strategy (Strategy Overview)

Allocations for December 2024 (Final)
1st ETF 2nd ETF 3rd ETF

Sector Breadth as Market Return Indicator

November 22, 2022 • Posted in Momentum Investing, Technical Trading

Does breadth of equity sector performance predict overall stock market return? To investigate, we relate next-month stock market return to sector breadth (number of sectors with positive past returns) over lookback intervals ranging from 1 to 12 months. We consider the following nine sector exchange-traded funds (ETF) offered as Standard & Poor’s Depository Receipts (SPDR):

Materials Select Sector SPDR (XLB)
Energy Select Sector SPDR (XLE)
Financial Select Sector SPDR (XLF)
Industrial Select Sector SPDR (XLI)
Technology Select Sector SPDR (XLK)
Consumer Staples Select Sector SPDR (XLP)
Utilities Select Sector SPDR (XLU)
Health Care Select Sector SPDR (XLV)
Consumer Discretionary Select SPDR (XLY)

We use SPDR S&P 500 (SPY) to represent the overall stock market and also relate next-month SPY return to the sign of past SPY return. Using monthly dividend-adjusted returns for SPY and the sector ETFs during December 1998 through October 2022, we find that: (more…)

Please or subscribe to continue reading...
Gain access to hundreds of premium articles, our momentum strategy, full RSS feeds, and more!  Learn more

Daily Email Updates
Login
Questions?