The charts below show the relative strength of the Financial and Technology sectors versus the S&P 500.  In each chart, a rising line indicates that the sector is outperforming the S&P 500 while a declining line indicates underperformance.  We have also included dots showing each time the Fed has recently cut rates (red) or left them unchanged (blue dots).  Given the fact that the two sectors are the most widely followed sectors in the market, any meaningful rally in equities will need to see both sectors participating. 

With the overall market correcting, it is not surprising to see that Financials have been weak.  In the days and weeks ahead, it will be important for this sector to stabilize or pick up now that it has moved back down to the range it was in for much of the Summer.

While the Financial sector is lagging, the Technology sector is improving.  After peaking back in July on a relative basis, the Technology sector has stabilized and has been improving over the last two to three weeks.  If the sector can break above its prior peak, it should set the stage for an end of year rally.  Otherwise, the market will be in for more of the recent lackluster action.

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