Sector Investing: Understanding the S&P 500's Building Blocks
Analyzing Fundamentals and Technicals for Market Insights.
The S&P 500 is a key indicator of the U.S. economy's health. Understanding its movements requires examining its constituent sectors, each representing distinct industries with unique characteristics and sensitivities to economic factors. Analyzing these sectors provides valuable insights into potential drivers of the S&P 500's performance, enabling more strategic investment decisions.
Market Follows the Script: Bearish Outlook Confirmed
Before continuing with our sector analysis, it's important to note that the market is behaving precisely as outlined in last weekend's Weekly Compass. The overall setup for the major indices remains bearish, based on monthly and weekly signals. As predicted, the expected bounce was short-lived, fading even on Monday.
Securities like TSLA, PLTR, and Bitcoin are now declining, validating previously bearish technical indicators. Last week's brief pullbacks, which were quickly bought, suggested consolidation as it was written; however, the loss of key central levels has triggered significant declines for the week so far (15% for PLTR, 3.6% for TSLA, and 4.8% for Bitcoin). As we noted over the weekend: Technicals don't matter until they do, and the accuracy of the bearish signals published on December 14th for the indices has been remarkable.
Sectors, Macro, and Fundamentals
This edition will be followed by a fundamental analysis for Semiconductors next week, and then a new update for international indexes. The Wednesdays edition is a solid source of indicators that provide context to the technical ones published on Fridays and Saturdays, maintaining the zoom to key companies (MU, TXN and INTC are next).
Every sector described in this publication includes the fundamental aspects to consider when assessing their context, you will also find an updated SPX chart after the 11th sector (Utilities). All charts presented here are based on weekly data as of today in the morning.
Each S&P 500 sector offers specific signals based on economic conditions, this guide gives you the references of which criteria should be analyzed when assessing trends and investor sentiment.
Some ETFs are considered in this analysis for technical purposes (XL#), it doesn’t mean they are the only ones available for each sector. Let’s begin.