MONTHLY AND WEEKLY SECTOR RANKINGS HELP FIND LEADERS AND LAGGARDS -- THE VALUE/GROWTH RATIO STILL FAVORS VALUE STOCKS

MONTHLY RANKINGS... Major stock indexes are ending the week with little change.   The Dow and S&P 500 show a modest loss while the Nasdaq is showing a minor gain.    To get a better sense of what's moving the market, a look at sector rankings can offer clues as to where money has been flowing.   Chart 1 plots the eleven S&P 500 market sectors over the last month.   Eight sectors have gained ground while three are in the red.  The four strongest sectors are economically-sensitive stocks that include energy, financials, materials, and industrials.   That's also part of the stronger performance of more value-oriented cyclical sectors that do better in a stronger economy.  At the same time, the two weakest sectors are consumer discretionary and technology.   Relative weakness in technology is also part of the rotation out of growth stocks that has taken place over the past few months.   That rotation into value helped the market withstand the selling of technology shares, and relative underperformance of the Nasdaq market.

Chart 1

WEEKLY RANKINGS... Chart 2 shows the sector rankings for the last week.   It shows five sectors gaining ground and six in the red.   It's also interesting to see a number of defensive sectors in a leadership role which include real estate, health care, utilities, and staples.   At the same time, several of the more economically-sectors lost ground during the week.  Technology moved to third place for the week which reflects some short-term buying of that sector.   Let's take a closer look at the value/growth ratio to see if this week's rankings changed any trends.

Chart 2

VALUE STILL IN THE LEAD... Chart 3 plots a relative strength ratio of the Russell 1000 Value iShares (IWD) divided by the Russell 1000 Growth iShares (IWF) over the last six months.    That ratio turned up last September and is still in an uptrend.  The chart shows its May peak pulling back from its March peak and which signaled a short-term retracement.   This week's pullback also reflects the relative weakness by cyclical sectors and a rebound in technology shown in Chart 2.   So far at least, that's not enough to signal a top in the ratio.   The value/growth ratio would have to drop a lot further to shift the balance in favor of technology-dominated growth shares.

Chart 3
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