REITS, FINANCIALS, INDUSTRIALS, AND MATERIALS SHOW NOVEMBER RELATIVE STRENGTH -- S&P 500 TESTS SUMMER HIGH

SECTOR SPDRS IN UPTRENDS... The number of sectors in rally mode has broadened out which is a positive sign for stocks.   You may recall concerns in recent months that the market rally was too concentrated in large growth stocks and lacked market breadth.   That's no longer the case.   During the month of November, ten of eleven stock sectors have gained ground.   In fact, the only November loser is the energy sector which is usually a good sign since it reflects lower energy inflation.   Not surprisingly, technology was one of the month's strongest sectors.   Todays's message, however, will show fourth other sectors that are in rising uptrends.   And falling bond yields have contributed to those gains.

REAL ESTATE LEADERSHIP... Chart 1 shows the Real Estate Sector SPDR (XLRE) in a leadership role during the last month.  The chart shows the XLRE trading at the highest level in fourth months and well above its moving average lines.    The green line shows that the REIT rally coincided with a downturn in the ten-year Treasury Bond yield and a rally in bond prices.    That's because REITs are a very rate sensitive sector which are also viewed as bond proxies.   Which is why they usually do better when yields are falling and bond prices rallying.

FINANCIALS SPDR EXCEEDS SUMMER HIGH... Financial stocks have also gotten a big boost from falling bond yields.   Chart 2 shows the Financial Sector SPDR (XLF) rising above its summer high to reach the highest level in two years.   The strongest groups with the XLF have been asset managers and bank stocks.

INDUSTRIALS ARE ALSO IN UPTRENDS... Chart 3 shows the Industrials SPDR (XLI) trading at the highest level in three months and well above its moving average lines.  The XLI appears headed toward its summer high.   Building material stocks and aerospace have been its two strongest groups.

MATERIALS ALSO CLIMBING... Chart 4 shows Materials trading above their 200-day moving average as well as trading at the highest level since September.    Two of its leading groups are steel and gold stocks.   A weaker dollar during November resulting from lower bond yields may also be a contributing factor.

S&P 500 STALLS BELOW SUMMER HIGH... The S&P 500 has turned in a strong 8% during the month of November.   And it has another month to go in a traditionally positive holiday season.   Chart 5, however, shows the S&P starting to stall below overhead resistance near its late July peak.   In addition, its 9-day RSI line in the upper box shows the SPX in overbought territory above the 70 level.  The wide spead between the price action and its 20-day moving average (green arrow) also suggests that stocks are in an overextended condition.