I've been watching critical areas like semiconductors ($DJUSSC), software ($DJUSSW), and internet ($DJUSNS) underperform vs. the S&P 500 throughout 2022. But the good news is that, since June, money rotating out of the three aforementioned aggressive sectors is finding a home in other industry groups. That's allowing the S&P 500 to remain afloat and significantly outperform the more aggressive and growth-oriented NASDAQ 100. Three industry groups, in particularly, are benefiting mightily from this rotation. In no particular order, here they are:
Aerospace
I don't know if you've been watching Boeing Co. (BA), but after a very difficult period from April through June, BA has soared more than 50%, lifting aerospace stocks ($DJUSAS) much higher in the process. Check out this chart:
That DJUSAS relative breakout in the last two months corresponds inversely to the weakness that we've seen in leaders like Apple, Inc. (AAPL), Tesla, Inc. (TSLA), and Alphabet, Inc. (GOOGL). If you're wondering why the S&P 500 still remains well above its lows from June and October, well the above chart is one reason why. Money isn't leaving equities. It's rotating and keeping the hopes of a shorter-term cyclical bear market intact.
Commercial Vehicles & Trucks
Commercial vehicles & trucks ($DJUSHR) is another industry within the industrials sector (XLI) that is flying high - so much so that it's recently set an all-time high. Yep, that's right. All-time high!
You can see the clear breakouts in terms of both absolute and relative prices. Currently, RSI is down at 53, so the DJUSHR is nowhere near overbought and very likely has further to run.
Medical Equipment
A lot of other industries, particularly those in financials, industrials, and energy, have been outperforming the medical equipment group ($DJUSAM) over the long haul, but I don't know if any are seeing the surge in bullish momentum that the DJUSAM is. The first chart below is the absolute price chart, showing that the 2022 downtrend has now been broken:
Because this uptrend is not nearly as established as the other two I showed above, it probably makes sense to keep a close eye on the rising 50-day SMA and the short-term up channel. If both are lost, then it would be necessary to re-evaluate the group.
Next is the relative price chart, showing that the relative PPO has sailed through centerline resistance and continues to gain steam:
This is just the tip of the iceberg in terms of sector and industry rotation. It's extremely important to keep track of groups that are in favor, especially if you like to trade in the near-term. Lots of folks are writing this market off and anticipating big declines in 2023. I'm not so sure and I will be dissecting a number of market signals next Saturday at our fourth annual Market Vision event. This will be a FREE virtual event and you're invited. Seats will be limited, however, so make sure you register NOW!
For more information on MarketVision 2023 and to save your seat, CLICK HERE. David Keller, Julius de Kempenaer, and Grayson Roze - all from StockCharts.com - will be joining me to deliver timely information as we look ahead to a brand new year. I hope you join us! And of course.....
Happy New Year and happy trading!
Tom
