The Visual Investor: How to Spot Market Trends, Second Edition

CHAPTER 10

Sectors and Industry Groups

The preceding chapters provided you with the necessary tools to perform visual analysis of the financial markets. That material deliberately avoided an exhaustive description of available market indicators to stress those that are the most useful. This focus also provided you with selected visual tools that can be used across a broad spectrum of markets and asset classes. With so many investment choices available to today’s investor, both on a domestic and a global scale, a relatively simple system is needed in the search for superior performance.

This chapter breaks the stock market down into sectors and industry groups. It’s often been said that the stock market is a market of stocks. It’s equally true to say that the stock market is a market of groups. It is important to know what they are and how to measure their performance because they don’t always do the same thing at the same time. Some market groups rise faster than others. Some fall while others rise. Most people would probably agree that the single most important question relating to stock investing is whether it’s a good time to put new funds into the market (or take some out). An equally important question is “where” in the market to put your money.

One thing that stock investing has in common with real estate is that “location” is very important. In this case, however, this means the location of your money within the stock market. Being in the right sectors and industry groups ...