ECONOMICALLY-SENSITIVE STOCKS OUTPERFORM -- MATERIALS ON VERGE OF UPSIDE BREAKOUT

TRANSPORTS GAIN, UTILITIES LOSE... Chart 1 shows transportation stocks rising while utilities are falling.  The significance of the chart is that it suggests that investors are turning more positive.   That's because stronger transports suggest a stronger economy while falling utilities show that investors are turning less defensive.   Airlines and truckers are leading the transports higher.   Utilities are also more closely tied to bond prices which have been falling.   According to Dow Theory, the stock market is also stronger when the Dow Transports are rising in sync with Dow Industrials which they're now doing.    We get the same message from stronger consumer cyclicals and weaker staples.

CYCLICALS OUTPERFORM STAPLES... Chart 2 shows the Consumer Discretionary SPDR (XLY) rising while Consumer Staples (XLP) have been falling since the start of May.   That's another positive sign because it shows investors favoring economically-sensitive stocks  over more defensive ones.   That's essentially the same positive message shown in Chart 1.

XLB NEARS UPSIDE BREAKOUT... Materials have also been gaining ground during June and may be on the verge of an upside breakout.   Chart 3 shows the Materials Sector SPDR (XLB) testing its April high.  A close above that high would be a positive sign for this economically-sensitive sector.  Stocks tied to steel have been leading it higher.    Chart 4 shows Nucor (NUE) already trading at the highest level in four months.   It's also been the strongest stock in the XLB over the last month.   Copper stocks are the sector's second strongest group.

JUNE SECTOR PERFORMANCE... Chart 5 ranks sector performance for the month of June.   And it confirms what  we've seen in the above charts.   Consumer discretionary stocks have been the month's strongest sector while consumer staples and utilities have been the two weakest.  Industrial stocks are in second place and have been led higher by airline stocks (as in the Dow Transports).   Materials are in third place and on the verge of an upside breakout as shown in Chart 3.