Market Insights

Market internals is a field of technical analysis that considers how companies within the stock market are performing. A recent article covered breadth, and now we’ll turn to sector performance.

This technique assesses the S&P 500 by comparing price changes of different constituent groups like technology, energy and financials. Are investors favoring “risk-on” stocks that are consistent with a bullish market? Or are they hiding in “safe havens?” Answering such questions can help confirm or invalidate moves higher and lower. Here are a few ways to think about sector performance.

Growth vs Value

First, sector performance can help distinguish between “growth” and cyclical market conditions. Companies like Nvidia (NVDA), Apple (AAPL) and Microsoft (MSFT) are normally considered growth stocks because their businesses are newer and gaining wider adoption as end-markets expand. On the other hand, firms like JPMorgan Chase (JPM) and Caterpillar (CAT) are economically sensitive. Their results often benefit when the business cycle accelerates and struggle when recessions occur, which makes them cyclical. (The same can be true for materials.) They’re also commonly called “value stocks” because such companies tend to have lower multiples than growth stocks.

S&P 500 vs Consumer Staples Select Sector ETF (XLP). Prices as of May 20, 2026.

Megacap Leadership

Most investors probably know that large growth stocks like NVDA have dominated performance in recent years. Given their size, they often pull the market higher or drag it lower. Sector performance can also help us follow such key stocks. They’re mostly concentrated in three sectors, tracked by these ETFs:

• Technology Select Sector SPDR ETF (XLK):
  • XLK holds AAPL, NVDA and MSFT.
  • Semiconductors, software makers and IT hardware firms fall under this group, which accounts for one-third of the S&P 500.
• Consumer Cyclical Select Sector SPDR ETF (XLY):
  • Amazon.com (AMZN) and Tesla (TSLA) account for almost 40 percent of the group.
  • Travel-related companies like Booking.com (BKNG) Airbnb (ABNB) are also included.
• Communications Select Sector SPDR (XLC)
  • Alphabet (GOOGL), META, Netflix (NFLX) and Take-Two Interactive (TTWO) account for about half of the group.

Investors may look for strength in these three sectors to confirm a bullish move in the market. Likewise, they may expect a pullback when the growth sectors lag. This pattern applied in late 2021 and early 2022 as a bear market took hold. It also applied in early 2026 before the market pulled back.

Safe Haven Warning

Sector performance can also foreshadow potential drops if investors monitor “safe-havens” like consumer staples. This group, tracked by the Consumer Staples Select Sector ETF (XLP), includes companies like Costco (COST), Procter & Gamble (PG) and Coca-Cola (KO). Safe havens often lag in a rising market. They sometimes take leadership toward the end of a bullish move as investors stop buying leaders like big tech or economically sensitive stocks like financials.

Traders may therefore look for relative weakness in XLP to confirm a bull market. Strength in the group may indicate a pullback is coming.

Customize indicator dialog for Relative Strength study on charts. Key options are marked.

Relative Strength

Customers looking to analyze sector performance on charts can use the relative strength indicator, which compares the percentage changes of different securities:

• From a chart, click on Studies → Add Study…
• A dialog box will appear. You can scroll down to “Relative Strength.” (Make sure the “Indicator” tab on the left is selected.)
  • Note: This is a different study from the Relative Strength Index (RSI) oscillator created by J. Welles Wilder.
• Once it’s added to the chart, customers can right-click to customize it.
• Go to the Inputs tab to modify the ReferenceSymbol to change the comparison symbol. (Be careful to keep the quote marks “”.)
• The Length field in the Inputs tab also covers the time frame. Examples in this article use 21 sessions, which is approximately one month.
• The Style tab controls options like thickness and chart type.

RadarScreen™ can track multiple sectors over multiple time frames to detect shifts in performance and relative strength. (See this article for more.)

In conclusion, sector performance can help traders assess the market’s strength and leadership. It can also provide warnings for potential weakness. Hopefully this article helps you apply it to your charts and other tools.

Exchange Traded Funds (“ETFs”) are subject to management fees and other expenses. Before making investment decisions, investors should carefully read information found in the prospectus or summary prospectus, if available, including investment objectives, risks, charges, and expenses. Click here to find the prospectus.

Performance data shown reflects past performance and is no guarantee of future performance. The information provided is not meant to predict or project the performance of a specific investment or investment strategy and current performance may be lower or higher than the performance data shown. Accordingly, this information should not be relied upon when making an investment decision.

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