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.

Technology Continues to Dominate

Looking across the 11 major U.S. sectors, one thing remains remarkably clear: technology continues to lead by a wide margin.

Since the April follow-through, no other sector has come close to matching the performance of XLK. The relative strength advantage has been obvious and consistent every week we've reviewed the data. Leadership continues to be concentrated in technology and the growth-oriented industry groups.

As traders, our job is not to argue with leadership. Our job is to identify where capital is flowing and align ourselves accordingly. The evidence has been remarkably clear. If you have been fighting this leadership or searching for strength in weaker areas of the market, perhaps this should be your wake-up call.