WHILE TECHNOLOGY HAS SLIPPED, FINANCIALS AND HEALTHCARE HAVE BECOME MARKET LEADERS -- HEALTHCARE SPDR HITS RECORD HIGH
TECHNOLOGY IS NOT THE STRONGEST SECTOR ... Although a rebound in technology is getting the most attention, it's not the main reason that stock indexes are hitting new highs. Most of that credit goes to financials and healthcare. The daily bars in Chart 1 show the Technology SPDR (XLK) rebounding today after finding support at its 50-day average. The XLK remains well below its early June peak. Its relative strength line (above chart), shows it underperforming this month. Technology ranks in eighth place during June. The fact that it's bouncing is encouraging. Financials and healthcare, however, are having a better month.
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Chart 1
FINANCIALS ARE GAINING ... Financials have been one of the main beneficiaries of the recent drop in technology shares. Chart 2 shows the Financial Sector SPDR (XLF) rising to the highest level in three months. Its relative strength ratio (top of chart) has also climbed during June. Financials are the month's strongest sector (5.5%). Healthcare is second (5%).
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Chart 2
HEALTHCARE HITS NEW HIGHS ... Healthcare has an even stronger chart pattern than the financials. Chart 3 shows the Health Care SPDR (XLV) rising to a a new record high today. Its relative strength ratio (top of chart) has risen to the highest level since last November. I've said it before, and I'll say again. Healthcare remains one of the best bargains in the market. And it's not attracting much media attention. Investors, however, are paying attention. And that's all that really matters. Healthcare and financials are tied for the second biggest sector in the S&P 500 (14% each). Technology is still the biggest sector (22%). But financials and healthcare carry a combined weight of 28%. That's why it's a good sign to see them doing more of the lifting.
