The Price of the VectorVest Composite peaked on May 9th at $27.82 per share and closed at a price low of $24.74 on June 13th. The leading Business Sectors as of May 9th, i.e., Steel, Mining, Metal Products, Paper and Machinery, were among the most severely battered during this five week downturn. Now more than six weeks have passed since June 13th and the market has tried desperately to re-group for a new rally. Indeed, it rallied briefly from June 13th to July 3rd, but was shot down by North Korean rocket launches and a new outbreak of fighting in the Middle East. Nevertheless, our MTI and BSR have been achieving higher lows, which suggest that another rally is imminent. Ideally, one would want to buy stocks in the Business Sectors which are emerging as the new leaders. How do we find these guys?

The simple answer would be to open Sector Viewer and see which Business Sectors currently have the highest Relative Timing, RT, values. If one did this as of last night, they would find that the top five Business Sectors are now comprised of Utility, REIT, Bank, Container and Market. Should I buy stocks in these Business Sectors when the market rallies?

It's interesting to note that the top three Sectors, Utility, REIT and Bank, are interest rate sensitive. Obviously, the smart money is betting that interest rates have peaked. Sounds good, but are these Sectors at the top of the list because they have held up better than the others or because they have been rising rapidly? A 10-day Price Delta shows that Utility is the fastest rising Sector and Mining is ranked among the top five fastest rising Sectors. So which Sectors really are the new leaders?

I ran some back-tests to see how picking stocks from rapidly rising Sectors compared to picking stocks from high RT Sectors. While both methods produced positive results in the periods I tested, the technique of picking stocks in the most rapidly rising Sectors consistently gave better results. So I would have to say that using a 10-day Price Delta on Business Sectors is a better way of finding New Leaders.

P.S. Visit the VectorVest University to see this technique illustrated as this week's "Strategy of the Week."