S&P 500 (INDEXSP:.INX) Market Internals and Names You Should Be Watching

By ChartLabPro.com  SEP 28, 2012 10:10 AM

Amazon, Google, AT&T, and Home Depot make the list.


MINYANVILLE ORIGINAL It’s that time of the week where ChartLabPro.com brings you S&P 500 (INDEXSP:.INX) market internals and names you should be watching. We will be reviewing: 1) the strongest S&P 500 companies by sector, 2) the strongest 20 S&P 500 names, 3) the top 10 overbought and oversold S&P 500 names, and 4) a heat map of the S&P 500 broken down by ChartLabpro.com Buy/Sell Algorithm, and 5) the most rapidly improving S&P 500 names.

Before we talk about the strongest names in the S&P, let us first tell you about ChartLabPro.com’s proprietary rating system. This algorithm does not use the standard MACD and moving averages; we feel that looking at the same technical data provides little edge over other market participants. This algorithm has been used for the last 13 years in running institutional money.  The rating is as follows: Strong Sell (1), Sell (2), Neutral (3), Buy (4), Strong Buy (5).

The first chart below references the 1- to 5-day trend of the strongest 20 names in the S&P 500 by sector.  "Strongest" does not mean percent return or performance. We like looking at this information for several reasons. Two months ago the list was dominated by telecoms and utilities.  Another interesting thing to note is financials; six weeks ago there were no banks on this list.  As we saw this shift we anticipated a further rally to the upside. For the last several weeks we have seen consumer service and health care dominate the list.   

Below we have the top 20 names in the S&P 500. This image shows seven names that are Approaching Overbought.  At an Approaching Overbought level, we reduce 50% exposure and remain long until either a rating change or an Overbought level.  These names include Gilead Sciences (NASDAQ:GILD), Google (NASDAQ:GOOG), Home Depot (NYSE:HD), Procter & Gamble (NYSE:PG) and AT&T (NYSE:T).

Click to enlarge

Below are two examples of how and why we reduce risk after seeing significant gains.  After seeing a 30% gain with Amazon (NASDAQ:AMZN) and 19% gain in Google, we reduced 50% of our exposure and will wait to reduce the rest.



The image below illustrates the top 10 overbought and oversold names in the S&P 500.

The following heat map will give you a much more granular view as well as a 30,000-foot view of the ratings.  Below we list the top 50 strongest "5" ratings.  The 5 strongest names in the S&P 500 are on the far right of the heat map and include: AT&T, Eli Lilly (NYSE:LLY), Limited Brands (NYSE:LTD), Comcast (NASDAQ:CMCSA), and Iron Mountain (NYSE:IRM).

The last graph below shows the most rapidly improving names in the S&P 500 in the last five days. This list is compiled by starting with a neutral rating and taking the fast velocity move to either a Buy or Strong Buy rating. 

For more from ChartLabPro.com, click here.
No positions in stocks mentioned.

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