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The Changing of the Guard

Stocks rallied again on Tuesday. The technology-laden Nasdaq Composite Index (COMPQ) closed at an all-time high.


Is this the changing of the guard?


No, not the changing of the guard at Buckingham Place, but a return to the former leadership names such as technology and growth stocks?


Tuesday's rallies came as FED Chairman Powell, speaking before Congress, reiterated that rising inflation is transitory. Powell again stated the central bank would wait for actual inflation to appear before raising interest rates.


The stock market reacted to the news as the S&P 500 Index (SPX) rallied 21.65 points or 0.51% to 4,246.44, leaving the benchmark index only 0.25% away from its 6/15/21 record high, at 4,257.16. The Nasdaq Composite Index (COMPQ) recorded a new all-time high after gaining 111.79 points or 0.79% to 14,253.27. The blue-chip Dow Jones Industrial Average (INDU) also rose, adding 68.61 points or 0.20% to 33,945.58.


On the sector front, 9 of the 11 major S&P 500 sectors were positive on Tuesday. Only two were negative - real estate and utilities. Consumer discretionary (XLY) and technology (XLK) stocks were the leaders gaining 0.94% and 0.91%, respectively.


Although we realize summer is a time to relax and enjoy the nice weather, the stock market may experience a changing of the guard this year. Technology and growth stocks appear to be poised to regain their leadership roles after consolidating for the past few months.


Enclosed below are charts of popular US indexes. Pay attention to the recent technical developments or the market action over the past couple of months. Will technical breakouts during the summer force investors and traders on vacation or the sidelines to return to the prior market leaders?



Source: Chart courtesy of StockCharts.com

Source: Chart courtesy of StockCharts.com

Source: Chart courtesy of StockCharts.com

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