Tag Archives: SDY)

Are Dividend Stocks Preparing to Take The Reins?

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With the S&P 500 ($SPX) rallying hard last year, we saw dividend stocks fall to the wayside in relative performance. The chart below shows the ratio between the S&P Dividend ETF ($SDY) and the S&P 500 ($SPY), which has now fallen to its 2012 low. With selling coming into the market to start the year, the ratio has begun to consolidate.

However, momentum has been making higher lows on the Relative Strength Index. The RSI indicator has put in a positive divergence that would suggest market internals are hinting that traders may soon begin to show favor towards dividend paying stocks. We can see signs of this already with two dividend-heavy sectors, utilities ($XLU) and REITS ($VNQ) up 6.7% and 7.6% YTD, respectively. We’ll see if the relative performance between $SDY and $SPY holds support and begins to confirm the bullish move currently taking place in momentum.

SDY SPY

Disclaimer: Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this post is meant for educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned in the blog. Please see my Disclosure page for full disclaimer. Connect with Andrew on Google+, Twitter, and StockTwits.

A Shift Into Defense Equity Names

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I apologize for the lack of posts over the last week, things have been very busy at home and at work and I just haven’t had the chance to get more content up on the blog. But anyway….

Well we were just a hair short of hitting Tom Demark’s estimate for the S&P 500 yesterday. He was looking for the index to top out at 1,492.73 and we closed yesterday at 1,492.56. I’ve been discussing a lot of charts recently that are giving me concern over the further advance in equities. Today I want to look at two defensive ETF’s in relation to the S&P 500. During healthy rallies we typically see overall equities outperform the defensive names as investors shift out of the ‘non risky’ areas of the market and into the higher beta stocks.

In the first panel we have the ratio between the S&P 500 ($SPX) and the SPDR S&P Dividend ETF ($SDY). During the rally off the July ’12 lows the blue line was rising, telling us that the S&P was outperforming $SDY. Once the market started to experience some weakness between September and November $SDY began to outpace the large equity index. These two moves are what we like to see in a market enviroment. What’s interesting is that even off the November lows, the S&P was never able to take the driver seat as the dividend ETF ($SDY) continued outperforming.

DefensiveIn the bottom panel we have a similar ratio chart, this time between the S&P and the Guggenheim Defensive Equity ETF ($DEF). The only difference we see here from the first panel is that large cap equities did in fact begin to outperform as the rally began off the November lows. But recently we’ve seen the trend line break as investors have shifted back to the defensive areas of the market during the first few weeks of 2013.

These are just two more warning signs that things may be getting ready to shift in the capital markets. I still am looking for price to confirm my thinking and see some type of blow off top or a trend change. However until then I’ll be patient.

Disclaimer: Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this post is meant for educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned in the blog. Please see my Disclosure page for full disclaimer. Connect with Andrew on Google+.