Analysts routinely visit management teams of public companies to see how their quarters are progressing. Based on the knowledge they gain, they return to their offices and their firms issue recommendations to buy or sell. It's the reason that we do what we do. By analyzing price action, we begin to get a feel for which areas of the market we're likely to see a rapidly improving earnings environment. To that end, I'd suggest taking a look at the following groups based on their recent relative outperformance:
The green shaded area shows that each of the above industry groups have performed extremely well on a relative basis over the past month. However, I want to focus on the areas that have been outperforming since the December market bottom. Blue directional lines highlight these "better" relative performers, while the red directional lines suggest we might want to be a bit more cautious on the others.
Specialty finance ($DJUSSP) is one of my favorite areas heading into earnings season as it's the only group above that's broken out to fresh relative highs. Don't be surprised to see some blowout reports in this group.
Happy trading!
Tom
