Four Top Industry Groups

04/10/2015 10:05 am EST

Focus: STOCKS

Thomas Aspray

, Professional Trader & Analyst

Given that these four industry groups are clearly leading the market, MoneyShow’s Tom Aspray analyzes the charts to see which ones look the best technically.

Even though stocks closed generally higher Thursday, it was another choppy session reflected by the neutral A/D readings. Both the Dow Utilities and Russell 2000 closed the day with slight losses while the Philadelphia Oil & Gas index was up 3.18% on the day. The S&P 500, Nasdaq 100, and Dow Industrials were all up close to 0.5%.

The light economic and earning calendar Friday may give the market a rest until next Tuesday, when companies like Intel (INTC), Johnson & Johnson (JNJ), and JPMorgan Chase (JPM) all report.

The US market may get a boost from the strong overseas markets as the Hang Seng was up 1.22% and the Shanghai Composite was even stronger gaining 1.94%. The euro markets are also higher again in early trading with the Dax Index up over 1%. 

The Spyder Trust (SPY) closed above the late March highs and the S&P 500 A/D line closed to another new all time high. The SPY is currently showing nice gains for the week, which I noted in last Friday’s Week Ahead column was important from a technical perspective. A daily close in the SPY above $211.30 is needed for a decisive upside breakout.

Though the SPY is up just over 2% YTD, the analysis of industry groups from BigCharts shows that the Dow Jones Consumer Electronics Index (DJUSCE) is up 28.9% over the past three months. Let’s look at some of the other industry groups that are leading the market higher.

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Chart Analysis: The top performers in the Dow Jones Consumer Electronics Index (DJUSCE) include Sony Corp. ADS (SNE) and Emerson Electric (MSN) as both up over 36%.

  • DJUSCE completed its continuation pattern, lines a and b, at the end of January.
  • After reaching the weekly starc+ band in the middle of February, it moved sideways for six weeks.
  • It now looks as though the uptrend is ready to resume.
  • The relative performance confirmed the breakout by moving through its resistance at line c.
  • The RS analysis indicates it is still a market leader.
  • The weekly OBV has turned up from its rising WMA but is still below the resistance at line d.
  • There is initial support at 1014 with the 20-week EMA at 989.

The second best performer for the past three months is the DJ Real Estate Holding & Development Index (DJUSEH), which is up 18.2% over the past three months. Two Chinese property managers Xinyuan Real Estate Co. (XIN) and Cheung Kong (CHEUY) are two of the top performers.

  • The DJUSEH peaked at 102.73 in early 2014 and corrected for most of the year, before bottoming in December.
  • By the end of January, a new uptrend was underway with the weekly starc+ band in the 110 area.
  • There is further chart resistance now in the 113.40 area, line e.
  • Despite the strong performance, the weekly RS line has just reached its long-term downtrend, line g.
  • The RS line is well above its rising WMA.
  • The weekly OBV completed its correction in mid-January as it held well above support, line h, on the correction.
  • There is first support now in the 98-100 area.

Next: Two More Leading Industry Groups to Watch

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The Dow Jones Specialty Finance Index (DJUSSP) is up 13.07% YTD with stocks like Q Lotus Holdings Inc. (QLTS) up over 115%, so far, in 2015. There are a number of stocks in this industry group that are thinly traded.

  • The industry group surged to the upside in early February as the November high was easily exceeded.
  • The weekly starc+ band is now at $145.80.
  • The relative performance broke through major resistance, line b, in early February.
  • The RS line has made higher highs and is well above its rising WMA.
  • The weekly on-balance volume (OBV) also confirmed the upside breakout as it moved above resistance, line c, in January.
  • The OBV continues to act very strong.
  • There is initial support at 133 with the rising 20-week EMA at 130.14.

The Dow Jones Business Training & Employment Agencies (DJUSBE) is up 11.5%, so far, this year. It includes companies like Insperity Inc. (NSP) up 46.8% and Monster Worldwide (MWW) that has gained 33.7%.

  • This industry group has been in a solid uptrend, line e, since May 2014.
  • It staged a major breakout in February as the 2013 high, line d, was overcome.
  • The weekly RS line broke its downtrend in July 2014.
  • The completion of the bottom was a strong signal for stock pickers.
  • The RS line is still in a solid uptrend, line f.
  • The OBV is still slightly below its downtrend, line g, as it is acting weaker than prices.
  • It needs to surpass the September 2014 high to turn bullish.
  • The 20-week EMA is at 150 with the breakout level at 146.80.

What it Means: These four industry groups are clearly leading the market with the Dow Jones Consumer Electronics Index (DJUSCE) and Dow Jones Specialty Finance Index (DJUSSP) looking the best technically.

When looking at the stocks in these industry groups, pay close attention to the volume as some of the stocks have very low average volumes. I would suggest you use a site like finviz.com to sort companies by trading volume and to get a quick look at some of the charts.

How to Profit: No new recommendation.

Here are some of Tom’s most popular articles this week:

10 Beaten Down Dow Stocks 
Is Any Stock a 20-Year Buy and Hold?

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