Tuesday, October 30, 2007

Leading Sectors And Volume

As everyone is anticipating what the next Federal Reserve action might be, volume is becoming lighter as the market drifts higher. This is nothing shocking, but when looking at the energy sector one might expect volume to be greater with the strong move that Light Sweet Crude has had over the past week. Below is chart of Light Sweet Crude, followed by charts of the OIH(oil service holder) and XLE(energy ETF).

Light Sweet Crude(click charts to enlarge)

OIH - Oil Service ETF

XLE - Energy Sector ETF

As the charts show, Crude Oil is making new highs, yet stocks in related sectors are struggling to attain new highs and have been trading with low volume. This does not mean that these companies shares won't catch up and make new highs on strong volume, it just means currently the commitment isn't there. This could change, but it could also mean that conventional thought is oil has gotten ahead of itself and is due for some profit taking. If this is the case, stocks should drift lower. Below is one stock which is making new highs with increased volume.

FTI - FMC Technologies

FMC Technologies, Inc. engages in the design, manufacture, and servicing of systems and products for the energy, food processing, and air transportation industries. It operates in four segments: Energy Production Systems, Energy Processing Systems, FoodTech, and Airport Systems. The Energy Production Systems segment designs and manufactures subsea production systems, surface production systems, and separation systems for companies involved in land and offshore exploration and production of crude oil and gas. The Energy Processing Systems segment designs, manufactures, and supplies high pressure valves and fittings for oilfield service customers, as well as manufactures and supplies liquid and gas measurement and transportation equipment, and systems to customers involved in the production, transportation, and processing of crude oil, natural gas, and petroleum-based refined products. This segment offers various products, such as fluid control, measurement solutions, loading, material handling, and blending and transfer systems. The FoodTech segment designs, manufactures, and services food processing and handling systems used primarily for fruit juice production, frozen food production, shelf-stable food production, and convenience food preparation. This segment offers citrus juice extractors and related citrus processing equipment, and aseptic juice and pulp systems; freezing systems; coating and cooking systems, portioners, and continuous batter-breading, frying and oven-cooking equipment; and commercial sterilization systems used for the production of shelf-stable and pasteurized packaged foods. The Airport Systems segment supplies passenger boarding bridges, cargo loaders, and other ground support products, as well as provides airport management services primarily for commercial airlines, air freight companies, and airport authorities. The company was founded in 2000 and is based in Houston, Texas.

Below is a chart of the S&P 500 Index with indicators showing the performance ratios of both the energy sector and the basic material sectors. This year both have been among the leadership groups pulling the market higher. This makes it very important to watch these groups and volume relationship of the leaders in each sector as new highs are approached.

S&P 500 Index with Energy and Basic Material Performance Ratios

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