Sector Update for July 20th

Last week's sector review noted the possibility that selling could dry up in stocks, frustrating the bears and leading to an intermediate-term move back into the May/June trading range. With stocks unable to take out the prior week's low on Monday weakness, it was off to the races for the bulls, who rejected those price lows and moved shares all the way through that May/June range. As we can see from the top chart, the turnaround was evident across all sectors, as all are now trading in short-term uptrends, as measured by the proprietary Technical Strength indicator. The bottom chart, averaging the Technical Strength across sectors, shows that we have risen on substantial momentum, with Technical Strength near multi-month highs.

Here is how the individual sector readings looked as of Friday's close:

MATERIALS: 280
INDUSTRIAL: 240
CONSUMER DISCRETIONARY: 320
CONSUMER STAPLES: 280
ENERGY: 200
HEALTH CARE: 260
FINANCIAL: 160
TECHNOLOGY: 340

Note the particularly large jump in the technology and consumer discretionary sectors, both groups that draw upon themes of risk-seeking and economic expansion. After notable commodity weakness in the prior weeks, we can see that the materials and energy shares also bounced back strongly last week.

While it would not be unusual to get short-term weakness following five consecutive rising trading sessions, the bullish themes are in relative unison and there is impressive breadth to the turnaround. New highs in the average Technical Strength reading (bottom chart) would support a scenario of sustaining new bull highs for the move since March. I will be tracking the indicators via Twitter and posting observations prior to market opens (follow here).
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