Date: June 14, 2018

Canaries in the Coal Mine Part II – Sectors

Let’s turn to the next group of canaries and see how our sectors were doing at the January peak. First, I am repeating the Dow Industrials with the Dow Transports right below it to show Dow Theory which says that these two indices should be making highs together or a warning is sent. While both indices saw all-time highs in January, you may observe that they were on the same day or even week. That would not be a warning or cause for concern unless more time elapsed in between.
Seeing that the Dow Transports did make an all-time high in January, let’s turn to the other key sector canaries. As you can see below, the banks, semiconductors and consumer discretionary all made new highs in January. Again, this is absolutely not the type of behavior typically seen at the end of bull markets.

Paul Schatz, President, Heritage Capital