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Investors: Forget the Market Theories; Watch These Two Sectors to Determine Broader Strength


Considering semiconductors are in almost everything consumers buy, and all consumables have to be transported, these sectors typically lead economic expansion.

This confidence comes in many forms, such as price action, volume, and secondary indices. With price action being relatively decent and volume having to be tossed out due to the SPX rebalancing on Friday, investors should evaluate the broader strength from two of the most important sectors: transportation (Dow Jones Transports (INDEXDJX:DJT)) and semiconductors (PHLX Semiconductor Index (INDEXNASDAQ:SOX)).

Not to digress on a tangent but… considering semiconductors are in nearly everything consumers can buy off the shelf (excluding food) and all consumables, i.e. inventories, have to be shipped, these typically lead economic expansion. The last week or two have not been technically kind to these areas. Not only did these not break out to the upside with the broader market having ample opportunity, but they have begun to do just the opposite -- break down.

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No positions in stocks mentioned.

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