Six of the eleven S&P 500 sectors are now improving their relative trends versus the S&P 500.
Here’s the chart:
Let's break down what the chart shows:
The chart displays the S&P 500 in black in the upper-left corner.
The remaining charts compare each S&P 500 sector against the S&P 500 using relative ratios. Green lines highlight sectors with improving relative trends, while red lines highlight sectors with weakening relative trends.
The Takeaway: Technology has carried this bull market for a long time.
That leadership is beginning to fade. The relative trend is in the process of rolling over, and Technology is no longer separating itself from the rest of the market.
That would be a concern if weakness were spreading across every sector.
Instead, the opposite is happening. Health Care, Industrials, Financials, Materials, Real Estate and Utilities are all improving on a relative basis. They spent much of the past few months lagging behind the market. Now buyers are beginning to rotate back into those groups.
That's an encouraging change beneath the surface.
Leadership is becoming less concentrated and more widespread. Instead of relying on one part of the market to do all the heavy lifting, more sectors are beginning to contribute. That's usually a healthier backdrop than one driven by only a handful of stocks.
This doesn't look like investors abandoning equities. It looks like investors repositioning within them.
If the market were entering a broad correction, I'd expect to see weakness spreading across most sectors. Instead, I'm seeing money leave yesterday's leaders and flow into new ones.
That's changing where I'm looking for opportunities.
Instead of chasing the Technology stocks that have led for most of this bull market, I'm spending more time searching for setups in Health Care, Industrials, Financials, Materials, Real Estate and Utilities. Leadership is rotating, and I want my portfolio to rotate with it.
Grant Hawkridge | Chief Aussie Operator, All Star Charts
Spencer Israel sits across from the entire analyst network every day, hears more good ideas than any one person could ever trade, and picks the ones he likes most.
The SMTV Portfolio is what happens when he puts $10K of his own money behind those calls.
