Over the past several weeks, select cyclical sectors have started to perk up. From Industrials to Transports to Financials to Materials, all have seen strength.
This is good news for investors, as this could signal a fresh leg higher for stocks.
Today, I’d like to zoom in on the Financials (NYSEARCA:XLF) and Transports (NYSEARCA:IYT).
So how does all this work? The theory goes something like this: As economy starts to perform better, businesses and consumers open their pocket books and cyclical sectors begin to perform better. And as this occurs, treasury bond yields begin to rise (which we have also seen).
The two sectors mentioned above (financials and transports) tend to perform quite well when the economy is on the cusp of an uptick.
As you can see in the charts below, both sectors are nearing major breakouts. The XLF (financials) and IYT (transports) are attempting to push past prior highs. This is what the bulls want to see. BUT it’s also worth noting that this is early in the “breakout” phase, and bulls will need to see follow through (as breakouts can take some time).
Put these sectors on your radar. A double breakout would be welcome news for the broader markets.
Thanks for reading.
Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.