LOOKING FOR SECOND HALF LEADERS -- BIOTECHS AND SEMIS SHOW NEW LEADERSHIP -- SO DO RETAILERS

GROUP LEADERS FOR THE LAST MONTH ... The performance bars in Chart 1 show the group leaders over the last month. While some of them are old leaders from the first half of 2005 (energy, housing & real estate, and utilities), there are some new leaders emerging. Among them are brokers, biotechs, gold, semiconductors, and retailers. The two top leaders since the start of July have been biotechs and semiconductors. I wrote about chip stocks yesterday and biotechs last week. Chart 2 shows the Biotech iShares breaking through their 200-day moving average to a new five-month high since the start of July. Chart 3 shows the Semiconductor Holders (SMH) breaking through their 2005 highs over the last week. They certainly qualify as new market leaders. So do retailers.

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RETAIL HOLDERS HIT NEW 52-WEEK HIGHS ... Chart 4 shows the Retail Holders (RTH) breaking through the highs of last November. Their relative strength line has been rising since May and has climbed to the highest level this year. That confirms the new leadership shown in the recent performance bars. That's not all. The monthly bars in Chart 5 also show that the RTH is breaking through the previous high reached in the first half of 2002. That's pretty strong action in a relatively flat market.

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RETAIL LEADERS... A couple of today's retail leaders are shown below. Home Depot has broken out to the highest level in five months and is showing good relative strength.[HD is the second biggest holding in the RTH at 15% and is second only to Wal Mart at 22%]. Chart 7 shows Lowes soaring to a new 2005 high. Notice the pickup in trading volume as prices have risen over the last three days. The weekly bars in Chart 7 paint an even more impressive chart picture for Lowes. They show the retail leader breaking through its 2003-2004 peaks at 60. Other retailers at or close to new 52-week highs are Kohl's, Target, and Walgreen.

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ENERGY ETFS CONTINUE TO CLIMB ... There are no signs of a top in energy shares. With crude oil climbing back over $60 today, both energy ETFs are at or close to new record highs. The Energy Sector SPDR (XLE) is nearing a test of its recent high at 47.30, while the Oil Service Holders (OIH) are already in new high ground. Both ETFs have stayed above their breakout points formed earlier in the year (100 in the OIH). And their relative strength lines are still rising. That's why it's a good idea to stick with old leaders until they show signs of peaking. It's also a good idea to start adding some new leaders to the old ones. The performance bars in Chart 1 -- and the preceding charts -- show some new candidates.

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