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James Brumley

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New Leaders Emerging (& It’s Not the Old Ones Again)

We haven’t talked about it in a while, mainly because there was no need to. Things are changing now though, at the onset of what we hope/think will be the next leg (and less aggressive span) of the bull market. With this new wave though, it looks like we’ll see some new leaders.

Not that all the votes are in, but from the data we have so far, telecom, utilities, consumer staples, and perhaps energy are going to lead the market out of this rut. Not only did those sectors fall the least since the May 23rd top, they’ve also moved ahead the other sectors since the beginning of the month. Indeed, they are the only sectors to actually make net gains since then - the rest are still in the red.

As we said, it’s a tad too soon to dive into the pool blind-folded….. maybe you wade in slowly while we continue to gather data. It’s a plausible and logical group of leaders though. They’re safe and reliable, which is what investors want in the shadow of May’s stunning meltdown.

We’ll update this chart in the blog every few days until we start to get some clear leadership trends.

As for style and market cap trends, we’re not seeing the same degree of distinction.

We can see that large caps (growth as well as value) held up better and recovered better over the last month and a half. That’s probably something worth keeping in mind as decisions are made going forward. We can also see small cap value and micro caps have struggling since the top, and have found no relief over the last few days….. even though the rest of the market has. That too is something that should register as you make decisions in the foreseeable future. Everything else is a case-by-case basis.

As was the case with the sector comparison, this isn’t enough data to come to any firm conclusions. So, we’ll update the style/cap performance chart in the blog every few days until we get more clarity.

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James Brumley is a freelance writer and registered investment advisor. He began his career as a broker with a major Wall Street firm, where fundamentals and long-term holding periods were core strategies. After that, he switched gears completely, becoming an analyst at a short-term trading newsletter that focused on technical analysis. He now manages client money using the best of both philosophies. His company, Bluegrass Portfolio Management, offers investors an opportunity to reap superior returns with minimized risk.