Technology roars higher while Cyclicals fall

The stock market is still moving higher and higher, seemingly without end. The U.S. government bonds, however, (the 2-year note, the 5-year note, the 10-year note and the 30-year bond) have all moved higher since July 7. This tells us that our economy is very weak. If it were strong, there would be a steady increase in loan demand; this would push interest rates higher and the price of the bonds would fall. The current weakness in business activity is having the opposite effect on the bond market.

My table of relative-strength stock-market sectors shows the Transportation Sector plunging to a 4.9% loss in July from an amazing 11.9% gain in June. The Transportation Sector shows us the strength of the part of our economy that requires these services. Manufacturing would be an example of an industry that makes great use of transportation.

All but one of the sectors in the Technology Group gained strength in July while eight of eleven sectors in the Cyclical Group lost strength. When the market is bullish and healthy, these two groups work together as both are considered growth stocks.

The Semiconductor Sector (within the Technology Group) has the highest growth in July of a very unusual 11.5%. Here are the 3-year sales results for the stocks that are within this sector:

Symbol 3-Year Sales Results
SWKS 16%
ASML -1%
MRVL -18%
TSM 10%
NVDA 18%
QCOM -6%
AMAT 12%
MU -5%

The average for this group is only 3.2% or just over 1% per year. This is pathetic and it is the best performing sector!

Here is the relative-strength chart of the Transportation Sector:

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