Sector Sentiment Continues to Improve
Offense Sector Sentiment Outpacing Defense Sentiment
In each week’s Thrasher Analytics letter, a proprietary sentiment indicator is shown for each S&P sector as well as the average sentiment of the stocks within each sector. Plotted in the chart below are the average sector sentiment scores grouped by Defense (utilities, health care, staples, etc.) and Offense (tech, discretionary, financials, industrials, etc.).
Defense and Offense sector sentiment has been improving, with Offense sentiment continuing to outpace Defense sentiment. Offense sentiment last crossed above Defense sentiment at the start of the year and has remained above for the most of 2023 with just two minor crossovers in April.
The spread between the two sentiment groups is shown in the bottom panel and has been rising steadily since April. Green arrows are plotted when the spread is positive (Offense sentiment is above Defense) when the S&P 500 drops to a 20-day low. This indicates that weakness in the Index may potentially be short-lived as sector sentiment favors offensive sectors. We saw this happen most recently in March and in 2022 at the October and June lows.
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