Intermarket analysis/Investment opportunities/Need for diversification

speedy said: "I have spent the day analysing the trends of diferent ETFs and indexes. So far, it seems to me that the whole stock market follows almost exactly the same trend. I mean, all industries and stock market sectors seem to follow the same trend on daily charts. Considering the ETFs, I found only three that didn't seem to be correlated to one another (SPY, GLD, and TLT). That is one ETF representing the value of stocks, one the value of gold, and one the price of bonds. It really seems that the whole stock market (all industries and sectors) have been in an uptrend since approximately march 2003 and not only in the US, but in the world. Of course some industries seem to change trends a little sooner or a little later than other, but globally there doesn't seem to be much difference. The only thing that seem to really differ is the relative strength of a particular industry to another. Am I being wrong? Do you really know some industries that are absolutely not correlated to another (and do you have examples?)? If I am right, is it serious to talk about stock market diversification or even international diversification? What do you think?"

HappyHarry said: "I haven't done the research, so I can't say with certainty. However, what you say makes definite sense. Most of the industries seem to follow each other. However, there should be a few that are really down. Depending on how big the index is, though, you probably don't see much downside."

speedy said: "I invite everybody who is interested to look at the trend of the diverse indexes. I used a charting software (matastock) and I ploted some of the dow jones indexes (there are dow jones indexes for every sector, every industry, and sub-industries of the economy). You can have the name of all dow jones indexes on this link (page 4 and 5-you need Acrobat reader, though): http://www.djindexes.com/mdsidx/downloads/MicroSect_Rulebook.pdf#search='DOW%20JONES%20MICROSECTOR%20INDEXES'. I think finding out the trends of which industries are not correlated (if any) is of the utmost importance for investors otherwise diversification makes little sense! (I hope my english is understandable)"