Are These the New Market Leaders?

05/08/2015 10:20 am EST

Focus: STOCKS

Thomas Aspray

, Professional Trader & Analyst

Three broadly based industry groups have outperformed the S&P over the past week, so MoneyShow’s Tom Aspray studies the charts to determine if any or all of these are the new market leading groups to be watching for next stock picks.

The stock market was again supported at lower levels on Thursday, which also was the case in Wednesday’s session.  For a change, the Dow Transports were the strongest, gaining 1.13% for the day followed by a 0.53% rise in the Nasdaq 100 while the small-cap Russell 2000 was up 0.51%.

The daily NYSE Advance/Decline line turned up slightly Thursday but is still in a short-term downtrend. This is consistent with a short-term correction while the weekly analysis does not yet show sign of a more significant decline. Clearly, the tone for the week may be set by this morning’s job report.

Over the past week, the Spyder Trust (SPY) is down 0.8% but these three industry groups that are up 7.9%, 5.4%, and 4.0% respectively, according in this scan from BigCharts.com. Are all of these the new market leading groups, ones that you should be watching for your next stock picks?

chart
Click to Enlarge

Chart Analysis: The DJ US Platinum & Precious Metals (DJUSPT), as it turns out, is a very narrowly constructed index with less than ten stocks included. Most of its gain is tied to just one stock, Bourque Industries (BORK). This is another example of why it is important to examine the components or holdings of any ETF before you consider taking a position.

  • The best known name is Silver Wheaton Corp. (SLW), which does show some signs of bottoming.
  • The weekly chart of DJUSPT shows a triangle formation, lines a and b.
  • This could be a bottom formation but a close above 61.00 is needed to support this view.
  • The weekly relative performance shows a typical bottoming formation as it has moved back above its WMA.
  • A strong move above the resistance at line c, is needed to confirm.
  • The weekly OBV moved above its WMA in December and has continued to rise sharply.
  • The 20-week EMA is at 55.98.

The DJ US Marines Transports (DJUSMT) is up 5.4% in the past month. Some of its better known components are Matson, Inc. (MATX) and Diana Shipping (DSX).

  • The weekly chart shows that it is in a short-term uptrend, line f, from the January lows.
  • The weekly starc+ band is at 294.20 with stronger resistance at 311.90.
  • The weekly relative performance has turned up from its WMA.
  • A strong move above the resistance at line g, will complete the bottom formation.
  • The OBV is also in a short-term uptrend, line i and looks ready to turn up from its WMA this week.
  • A rally above the OBV downtrend, line h, would confirm the bottom formation.
  • There is initial support at 257 with stronger in the 245 area.

Next Page: One More Potential Market Leading Group to Watch

|pagebreak|

chart
Click to Enlarge

The DJ US Full Line Insurance (DJUSIF) is up 4% in the past week. American International (AIG) is the top performer for the last week, up 13.1%. Other well known components are Hartford Financial Services (HIG) and Allianz SE ADS (AZSEY).

  • DJUSIF is now testing the weekly resistance at line a.
  • The weekly starc+ band is at 50.49 with additional upside targets in the 54-55.00 area.
  • The rising 20-week EMA is now at 46.05.
  • The weekly relative performance broke its long-term downtrend, line b, in early April.
  • The RS line has turned higher after retesting the breakout level two weeks ago.
  • The weekly on-balance volume (OBV) has been in a strong uptrend since the 2013 summer lows, line c.
  • The OBV has just broken out to another new high as it has been leading prices.
  • The WMA of the OBV is now rising more sharply.
  • The daily RS line (not shown) is positive while the daily OBV is close to moving back above its WMA.

What it Means: The stock market has been dominated in 2015 by rotation from one sector or industry group to another. By regularly monitoring the industry group performance, one can often spot the new leaders.

It is important to examine the data closely, as while on the surface, the performance of the DJ US Platinum & Precious Metals (DJUSPT) may have tempted you to consider the gold stocks, knowing the narrow focus of DJUSPT should have convinced you to look elsewhere.

The broadly based groups that are outperforming the S&P can be mined for individual stocks that are also leading the market higher.

How to Profit: No new recommendation.

Related Articles on STOCKS