Industrial Strength Ahead?
As defensive rotation continues in the markets with real estate, utilities, and healthcare the top three major S&P sectors over the last one-month period, the industrials are in hot pursuit rising almost 3%. Seasonality is interesting with the XLI as notice the first 6 months of the year average an UNCH return essentially, but the second half of the year brings in the volatility, but once Q3 is in the rearview mirror, Q4 shines. September is the outlier month in the last 4 years down almost 6% with ZERO months CLOSING above where they began. Looking internally one of the best subsectors within has been the railroads, which do question the recession ramblings. NSC has been acting the firmest and now sports a bull flag pattern, which started with a successful retest of a break above the downtrend. A break above the 245 pivot carries a measured move to 270 in the near term. Of course, on the flip side, CNI has fallen 15 of the last 20 weeks. Stock selection is crucial and XLI bulls want to see the daily chart of the ETF start to trade a bit tauter. But looking under the sector surface shows some emerging leaders.