Tight As A Drum:
The industrials are still atop the major S&P sector rankings YTD, but its lead is shrinking down to just more than 2 percentage points over energy. Looking at the XLI chart it has CLOSED the last 2 weeks very tight, within just .20 of each other. If it can finish the week in this area it would complete a 3 week tight pattern, near all time highs. That type of constrained consolidation, has a habit of breaking in the direction of the prevailing trend. Longer term a nice looking double bottom pattern has taken shape, with resistance right near the round 80 number. This group is to be admired.
When former leaders fall, the move can be spectacular. For others tops take time. Below is a MONTHLY chart of prior best of breed name ALK. We did discuss a ratio chart showing the weak relative strength for the airlines in general comparing the JETS to the S&P 500. ALK is down 11 of the last 13 sessions, and the 2 up days on 2/25-26 CLOSED well into the lower half of the daily range. It has held the 57 area for 11 months now several times, but if the chart hits another air pocket, the descent could be rapid as it would represent a fall below a bearish head and shoulders formation with a rather large measured move.
This name still carries weight, in industrial traders portfolio, but perhaps not as much as it should. UPS is garnering more respect from a PRICE action point of view as it trades just 12% off most recent 52 week highs, while FDX is 32% off its own recent ascent. We have shown this example of FDX before, and this is how the chart was profiled in our 2/8 Industrial Report. If one were to take a present look the break below the rising wedge has gone nowhere, and we know the best breakouts or downs, tend to work out right away. The name is also not backing off, after filling in an upside gap from the 12/14 session on 2/12. One does not have to paint this picture necessarily as bullish going forward, but less bearish would be the appropriate stance.