Finding Leading Stocks

Big Shift in Relative Strength

Big change in relative strength over the last few weeks.

For weeks/months, the clear leadership across the major indexes has been the Nasdaq 100, Nasdaq 100 equal weight, Russell 2000 growth, and IWM.

Sector leadership has also been obvious: XLK technology has dominated, with semiconductors leading this Stage 2 uptrend since the March 30th lows. That strength has been followed by other tech-related groups like computer hardware, electrical equipment, software, and other growth areas.

But this week, the shift is much clearer.

Now the leadership is coming from:

• IWM, Russell 2000

• IWN, Russell 2000 Value

• MDY, S&P 400 Mid Caps

• DIA, Dow Jones

On the sector side, XLV healthcare is leading, followed by financials, industrials, and utilities.

Under the surface, the strength is showing up in healthcare providers, pharmaceuticals, homebuilders, biotech, insurance, and banks.

This has been building for a few weeks, but this week is the clearest rotation we’ve seen.

Make sure to dive into the next Big Picture Market Pulse before the market opens Monday.

It should be out soon.

Leadership Is Rotating. Your Screener Should Too.

The market has slowed recently, but small- and mid-cap stocks continue to act well. You can see this clearly in the price action, with IWM outperforming both the S&P 500 and the Nasdaq. While the major indexes have struggled to make sustained upside progress, capital has been quietly rotating out of the mega-cap leaders and into smaller names.

This is a normal and healthy part of a market cycle. At some point, every investor has to let go of what worked in the past and focus on where capital is actually flowing today. Leadership does not last forever, and markets reward those willing to adapt.

The Relative Strength Dashboard has been signaling this shift for some time. Strength has been broadening beneath the surface, with smaller stocks and select industry groups steadily moving into leadership while many of the former mega-cap leaders consolidate or lose momentum.

As a result, I’m becoming less interested in crowded mega-cap trades and increasingly focused on areas that are less familiar, less followed, and smaller in size. This is often where new leadership emerges and where the best risk-reward opportunities begin to form.

The good news is that this shift is easy to reflect in your process. A simple adjustment to your screener, such as tightening market cap ranges, float, or shares outstanding, can quickly realign your universe with where the market is allocating capital today.

Markets change. Leadership rotates. Your job is not to predict it, but to recognize it and follow the money.

I have a detailed post coming soon that will walk through the different screens I use to help identify these names.