ENERGY, STAPLES, AND UTILITY LEADERS

DOW UTILITIES HIT NEW RECOVERY HIGH ... Since the start of the new year, I've written about new leadership by consumer staples and energy. More recently, I wrote that utilities should be next in line to start showing upside leadership. All three groups are among today's leaders once again. Chart 1, however, shows the Dow Utilities are breaking out to a new recovery high (actually a new three-year high). Its relative strength line has also broken out. In my sector rotation work, movement into utilities is just another sign that investors are showing a preference for more defensive stock groups. One of the top utilities for the month of January has been Duke Energy. Chart 2 shows that utility leader breaking out to a new 52-week high. Its rising relative strength line shows market leadership as well.

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ALBERTO CULVER LEADERS STAPLES HIGHER... The Consumer Staples Select Sector SPDR is bouncing today and remains well above its 50-day moving average. Its relative strength line shows a relatively strong January for this defensive group of stocks. Today's staple star is Alberto Culver. Chart 4 shows the stock surging over 3 points and breaking through its July peak at 52 (which is also a new record high). Its relative strength line, which has been rising since the start of the new year, is also breaking out. Although I'm not recommending that anyone chase ACV at this point, there is a lesson to be learned here. Last Wednesday (January 19), I wrote a piece about "How to Spot Staple Leaders". The idea was to find the strongest stocks in the strongest groups (staples and energy). I wrote about using the S&P Sector Carpets to look for January leaders in the consumer staples group. One of the leaders listed was Alberto Culver. I also pointed out on January 7 that the stock was moving up on rising volume. It's probably too late to do anything with the stock today. But there were earlier signs that ACV was a stock worth investigating for possible purchase.

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ENERGY LEADERSHIP ... Energy remains the market's strongest sector. The Energy Select Sector SPDR (XLE) is moving up to challenge its November high. Its relative strength is rising as well. Ashland Oil is one of today's energy leaders. Chart 6 shows the stock trying to close over its fourth quarter peak near 60. Oil service stocks remain the strongest part of the energy patch. MORE ON THAT LATER.

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