Morning Note: Leaders Lagging

The tech sector's been struggling a bit of late. 

Having not seen a new high since April 19th, tech really needs to hold that yellow line it's been hugging on the daily chart or we're talking a near-classic, and potentially ugly, head-and-shoulders technical pattern:

Or, perhaps more symmetrically, we could be looking at a "reverse cup and handle." Another bearish technical pattern:

While I wouldn't personally place a big bet either way on the sector at this point, the fact that tech has been the leader throughout the bull market that began in 2009 (while it technically ended with last year's route, it feels far more like an extension of the old than the birth of a new to yours truly), and has lost its luster of late, however, has our attention.

Here's from our equity market file:

SECTOR LEADERSHIP: 0

Tech is showing a toppy pattern… denoting either rotation or classic leadership rollover that precedes bear markets: -1 

However, save for Consumer Discretionary, the other cyclical sectors have outperformed SPX over the past 6 months, while the defensive sectors have underperformed: +1 

So we're wondering, are we looking at your classic leadership rollover that typically begins several months before the next bear market, or are we just simply talking rotation (passing the baton to new leadership)? 

Our modeling at the moment favors the latter, but, again, we're keeping a close eye on it!

Asian stocks were mixed (down-biased) overnight, with 9 of the 16 markets we track closing lower.

Europe is clearly leaning green so far this morning, with 13 of the 19 bourses we follow trading higher as I type.

U.S. equities are mixed to start the day: Dow up 37 points (0.11%), SP500 up 0.16%, SP500 Equal Weight down 0.07%, Nasdaq 100 up 0.34%, Nasdaq Comp up 0.30%, Russell 2000 down 0.08%.

The VIX (SP500 implied volatility) is down 0.23%. VXN (Nasdaq 100 i.v.) is up 0.37%.

Oil futures are flat, gold's down 0.20%, silver's up 0.80%, copper futures are down 0.65% and the ag complex is down 0.89%.

The 10-year treasury is up (yield down) and the dollar is up 0.01%.

Led by solar stocks, healthcare stocks, silver, utilities stocks and Verizon -- but dragged by MP (rare earth miner), financial stocks, ag futures, industrial stocks and base metals futures -- our core mix is off 0.15% to start the session.

Here's the late great Jesse Livermore on that "classic leadership rollover" that can be a harbinger of bigger trouble:  emphasis mine...

"...there is another thing to remember, and that is that a market does not culminate in one grand blaze of glory. Neither does it end with a sudden reversal of form. A market can and does often cease to be a bull market long before prices generally begin to break. My long expected warning came to me when I noticed that, one after another, those stocks which had been the leaders of the market reacted several points from the top and—for the first time in many months—did not come back."

Have a great day!

Marty