contraxism

News Flash: Major Market Turns Aren't Announced In Advance

The market is turning bullish one sector at a time.

The 9 sector SPDR’s consists of 4 bull market sectors and 5 bear market sectors.

Materials, Energy, Utilities and Consumer Staples are the 4 sectors which have held a gradual upward sloping support line from Aug 2007 lows on the 1 year chart.

Financials, Industrials and Consumer Discretionary are the 3 sectors which have set new 52 week lows on their downward sloping support line in July 2008. The Technology sector downtrend bottomed in Jan 2008 and the Health Care sector bottomed in March 2008.

The Jan 2008 correction was easier to identify an interim bottom as all 9 sectors corrected simultaneously with a 37 reading on the VIX. The Mar 2008 correction was reminiscent of Jan 2008, but to a lesser degree with a VIX reading of 35. The July 2008 correction is more confusing because it was a staggered one due to the fact that Technology and Health Care have joined the Bull camp, adding 2 more sectors. Therefore the Bear market has matured with 6 Bull market sectors versus 3 Bear market sectors.

If you are looking for leadership, it is happening in stages. The next sector to join the Bull camp will be the Industrials as the July 2008 lows were in line with Jan 2008, marking a double bottom support line on the chart. Financials and Consumer Discretionary sectors are getting much closer to the worst of their losses and will gradually be pulled along by the leading sectors and emerging market strength. Don't look to Financials for leadership, look to the leading markets for leadership.