There’s always a tell. Before the most recent rally we’ve seen in U.S. stocks since August, Aerospace & Defense stocks were breaking out. It was hard to be bearish equities with this A&D group, an important part of the Industrials sector, and a leader among leaders, coming out of an 8-month base to new all-time highs. Also, this came within the context of a tremendous uptrend, so an upside resolution was perfectly normal. That breakout was telling for stocks as an asset class. Today I think it’s Technology. What this sector does here should tell us a lot about this market.
After the new weightings, Technology is going to represent 20% of the S&P500, which is still a large chunk, despite being cut from 26% of the S&P500 pre-adjustments. It’s funny, strong markets do splits, not reverse splits. I’ll take this as a positive for Tech. And if it’s not, then I think we have a problem. That’s what we’re looking at here today. [Read more…]