OFFENSIVE SECTORS LEAD SEPTEMBER SURGE

Leadership from three of the four key offensive sectors makes the September surge all the more impressive. I consider the consumer discretionary, finance, technology and industrials sectors as the offensive sectors that are key to the stock market and the economy. Leadership from at least 2 of the 4 is needed for a rally to have legs. Consumer discretionary represents the most economically sensitive sector (think retail). Finance represents the health of the banking system. Industrials represent the industrial base. Technology represents the appetite for risk with its high-beta stocks.

The S&P Sector PerfChart shows the consumer discretionary, technology and industrials sectors up over 8%** this month. All three are up more than the S&P 500, which means they show relative strength and upside leadership. These are the sectors the bulls want to see leading the market higher. The fourth wheel, finance, is up less than 8%, but still outperforming the broader market with a respectable 7.79% gain. The only negative here is the short-term overbought conditions after such a sharp advance in a short period of time.