Stock rotation continues out of inflation-commodity stocks into growth names

Institutions are "re-pricing" positions that have been held in commodity-based positions; the word "du jour" to explain the of transfer (selling) of institutional money flows out of downward (falling oil and basic material prices) commodity names into growth (technology names). More importantly, a secular shift out of commodity names into growth names may be on the horizon as global economies soften and inflationary pressures ultimately cool. Starting with housing prices, oil, steel and other commodity-based materials appear to have reached an upside inflection point.

The weekly long-term chart (see above) displays the relative strength of the SPDR XLK (23.75) Technology Index compared to the SPDR XLE (54.52) Index since 2002. A vertical line is included showing the beginning of the market rally after the 2000 market collapse. At the bottom you see the ratio beginning its bottoming process as this shift ensues. Ultimately, a rising ratio would confirm further this shift remains intact.