Research Excerpts

Sector Investing: Is This Winning Sector Played Out?

Posted on: Friday, March 6th, 2015

Our sector rotation model utilizes a combination of proprietary ETF asset flow and price momentum metrics that indicate which sectors of the S&P 500 are under-invested or over-invested, and how to profit from these conditions.

In a report to subscribers on December 1st, we pointed out that the percentage of sector bet-related assets being allocated to the Consumer Discretionary sector had risen above their 63-day moving average, indicating an emerging new trend of quarterly expansion that suggested a new opportunity to overweight the sector.

Here is one of the charts from our December 1st report.

From Asbury Research's December 1st Keys To This Week report

From Asbury Research’s December 1st Keys To This Week report

The next graph shows that Consumer Discretionary has been the top performing sector over the past 3 months, and has also outperformed the S&P 500 by 5.5% during this period.

Sector SPDR Performance: Past 3 Months

Select Sector SPDR Performance: Past 3 Months

The next chart, updated through the end of February, is our own metric that shows Consumer Discretionary is currently the most over-invested sector of the S&P 500, comprising 9% of all ETF-related sector bets compared with just 5% historically.

Over-invested/Under-invested Sectors Through February 2014

Over-invested/Under-invested Sectors Through February 2014: Asbury Research

This chart warns that, despite recent outright and relative outperformance, this profitable investment idea may be getting “played out” and vulnerable to upcoming weakness/relative sector underperformance.

Our latest sector-related research can be found in our weekly Keys To This Week report, our monthly Sector Watch report, and in Asbury Alerts when there is a directional change in our model.

 Asbury Research Subscribers: Login to the Research Center to view our latest research, which includes more in-depth information and corresponding charts and data pertaining to US market sectors and our sector rotation model.